INDIAN REFINING SEGMENT IN PARLOUS STATE

Govt-run refiners may not be able to aggressively invest in clean energy projects as they stare at a rough road amid dwindling margins, volatile crude prices, shrinking discounts on Russian oil buys, and an inability to set prices for the fuels they sell

- S DINAKAR

India's oil ministry made a show of record profitability of state oil marketing companies last fiscal a performance that had more to do with geopolitics and some luck with global crude oil prices than with management or the government - but the noise generated failed to bury a poor fourth quarter and uncertain prospects moving forward. Moreover, such profits would not have been possible if state oil companies had stopped making supernormal margins on selling fuels, and had passed on lower costs from crude sourcing to Indian motorists, industry officials said.

Now, the road ahead looks unpaved. State-run refiners led by Indian Oil are staring at a rough year amid dwindling refining and marketing margins, volatile crude prices, shrinking discounts on Russian oil purchases, and, more important, an inability to set prices for the fuels they sell.

A projected downside in performance raises concerns over the capability of these companies to aggressively invest in clean energy projects that require billions of dollars, and the level of support they will require from the exchequer towards capex and operational needs-barring a onetime grant of 22,000 crore to refiners in FY23 for losses that they incurred from selling LPG, the Narendra Modi government has refrained from subsidising refiners directly in the last few years. Also, after setting aside ₹30,000 crore to fund energy transition initiatives of state oil companies, the government spent nothing, and cut the allocation by half after carrying forward disbursement to this financial year.

What will a coalition government's role be amid lower margins, shrinking discounts, and growing clean energy spends in a volatile global environment remains to be seen.