PSU oil cos to fuel growth with Rs 57,000-crore spend

Public sector oil companies have prepared a mega plan to help re-fuel a sputtering economy ........ READ below

27 Mar 2009, 0414 hrs IST, Rajeev Jayaswal, ET Bureau

NEW DELHI: Public sector oil companies have prepared a mega plan to help re-fuel a sputtering economy without any burden on the exchequer by spending Rs 57,000 crore next year on expanding supplies and building new transportation networks for oil and gas, a government official here said.

“The investments will help in accelerating economic activity at a time when private investment is shrinking. Most of these investments will be made in domestic projects and their economic benefits will be reaped locally,” said the official, who did not wish to be identified.

The government is expected to contribute only a tiny fraction of the cash needed for the ambitious stimulus activity. Virtually the entire amount, Rs 57,476 crore, will be met through internal accruals of 13 public sector oil companies. The government will be required to spend only Rs 25 crore, he added.

According to the mega plan, domestic exploration and production (E&P) major Oil & Natural Gas Corp (ONGC) will be the top investor with a budget of Rs 30,233 crore for 2009-10. This includes an outlay of Rs 9,365 crore for its foreign arm ONGC Videsh (OVL).

Fuel retail giant Indian Oil Corp (IOC) will be spending Rs 11,000 crore in the next fiscal, up almost a third from Rs 8,500 crore budgeted for the current financial year.

ONGC is aggressively investing money in its E&P business with projects worth Rs 60,000 ($12 billion) under construction, according to ONGC chairman and managing director RS Sharma.

“We don’t intend to slow down our spending plans. The board has approved investments worth Rs 25,000 crore in the past six months,” Mr Sharma said on the sidelines of an industry meet on Thursday.

Gail (India) has raised its budget by 63% in 2009-10 at Rs 5,558 crore compared to Rs 3,413 crore in 2008-09, a company executive said. “Most of the funds will be spent on developing pipeline capacities and in city gas distribution (CGD) projects. Most of the materials (such as pipes) for the projects will be supplied by domestic firms. Besides, the projects will employ thousands of workers from the unorganised sector,” he said.

A Planning Commission official said the oil ministry had demanded only Rs 25 crore gross budgetary support for Rajiv Gandhi Institute of Petroleum & Technology. “All other outlays are funded through internal and extra budgetary resource,” he said.

Other public sector oil companies that are a part of the spending plan include Bharat Petroleum Corp (BPCL), Hindustan Petroleum Corp (HPCL), Oil India (OIL), CPCL, BRPL, NRL, MRPL, Balmer Lawrie and Biecco Lawrie.