New Delhi: State-run Indian Oil Corp expects the government to soon reform the country’s fuel pricing system and has a budget of $1 billion to acquire oil and gas assets abroad, its chairman said on Wednesday.
IOC, biggest fuel retailer in India, may have to cough up a net revenue loss of about Rs3,000 crore ($638 million) in the last fiscal ending March because of government control on fuel prices, B M Bansal said at the Reuters Global Energy Summit in New Delhi.
The government caps the retail prices of petrol, diesel, kerosene and liquefied petroleum gas (LPG) to protect the poor and control inflation.
“The immediate challenge in my hand is how to arrange finances for continuous growth.... to some extent our projects have been delayed,” he said.
A ministerial panel is scheduled to meet on 7 June to consider the recommendation of a government panel on fuel pricing.
Bansal expects the government would now initiate reforms in fuel pricing after taking a bold step to more than double the prices of gas in one stroke.
“My view is that the government may free petrol pricing and for diesel, there could be a partial deregulation as the impact of the diesel will be more,” he said.
Bansal expects Indian fuel demand to grow an annual 3-4% this fiscal year.
“Indian demand was growing in difficult times also, I expect it to be 3-4% this year,” he said.
In 2009-10, oil product consumption, a proxy for oil demand in Asia’s third-largest oil consumer, rose an annual 3.5% to 138.18 million tonnes, the data showed, higher than government estimates of 2.4%.
He said the recent rise in IOC’s diesel imports is “temporary”, as cleaner fuel projects at some of its plants including Barauni in eastern India and Chennai in the south had been delayed.
But these projects will be on stream by the 1 October deadline.
Bansal, who has been associated with IOC for 36 years and played a key role in setting up the company’s petrochemical business, expects about Rs10,000 crore in revenue from product sale from its Panipat naphtha cracker, the largest such plant in India.
He said IOC would make a final decision by year-end on whether to proceed with a planned 2.5 million tonne-per-year (tpy) liquefied natural gas (LNG) terminal in southern India.
IOC owns 10 refineries in Indian with combined capacity of 1.2 million barrels per day.
He said IOC’s overseas focus is primarily confined to exploration and production assets, but it may look at entering into retail sales of fuel in countries such as Indonesia.
“If subsidy issues are sorted out in countries like Indonesia, then we would like to go into downstream marketing also,” he said.
IOC already sells products in Sri Lanka, Dubai and the Mauritius.
He said the company has kept aside $1 billion to acquire exploration and production assets overseas, particularly in Africa.
IOC has plans to have about 5 million tonnes of crude oil from its overseas assets by 2012.
“There is a setback to that, because of financial constraints, we could not go aggressively for overseas expansion. Our vision is still there, but 5 million tonnes may get delayed,” he said.