The government has scrapped the Rs 30,000 crore equity infusion it had planned in state-owned fuel retailers after they made record profits in the fiscal year ended March 31, according to the Budget Finance Minister Nirmala Sitharaman presented on Tuesday.

Sitharaman had on February 1 last year, while presenting the annual Budget for the 2023-24 fiscal (April 2023 to March 2024), announced an equity infusion of Rs 30,000 crore in Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) to support the three state-owned firm's energy transition plans.

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In the interim budget, the finance minister presented in February this year ahead of the general elections, the capital support to the three oil companies was halved to Rs 15,000 crore and the plan for filling strategic underground storage was deferred.

In the full budget for 2024-25, both plans have been scrapped.

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While the interim budget in February this year showed the amount against this entry at Rs 15,000 crore, the revised allocation in the full budget presented today showed Rs 0.01 crore as the expenditure for 2023-24 and nil in the 2024-25 budget provision.

While other state-owned oil companies like Oil and Natural Gas Corporation (ONGC) and GAIL (India) Ltd too have lined up billions of dollars of investment to achieve net-zero carbon emissions, the equity support was limited to the three fuel retailers, which had suffered huge losses in 2022 when they held retail petrol, diesel and cooking gas (LPG) prices despite a spike in raw material (crude oil) prices, following Russia's invasion of Ukraine.

But with three retailers IOC, BPCL and HPCL reporting record profits totalling about Rs 81,000 crore in FY24 (2023-24), which is far more than their annual earnings of Rs 39,356 crore in pre-oil crisis years, the capital support has gone.

The retailers have resisted calls to revert to daily price revision and pass on softening in rates to consumers on grounds that prices continue to be extremely volatile - rising on one day and falling on the other - and that they needed to recoup losses incurred in the year, when they kept rates lower than cost.

IOC in 2023-24 posted a standalone net profit of Rs 39,618.84 crore compared to Rs 8,241.82 crore annual net profit in 2022-23. While the company could argue that FY23 was impacted by the oil crisis, the FY24 earnings are higher than even the pre-crisis years - Rs 24,184 crore net profit in 2021-22 and Rs 21,836 crore in 2020-21. BPCL posted a net profit of Rs 26,673.50 crore in FY24, higher than Rs 1,870.10 crore earnings in 2022-23 and Rs 8,788.73 crore in FY22.

HPCL's 2023-24 profit of Rs 14,693.83 crore is compared with a Rs 8,974.03 crore loss in FY23 and a profit of Rs 6,382.63 crore in 2021-22, according to the filings.

The losses in FY23 had led to the finance minister announcing Rs 30,000 crore for IOC, BPCL and HPCL.

Mid-way through the year, that support was halved to Rs 15,000 crore.

The support was to happen by way of equity infusion via a rights issue.

The board of IOC and BPCL had last year approved rights issues to raise to Rs 22,000 crore and Rs 18,000 crore, respectively.

The government was to participate in the rights issue.

The three companies, which control roughly 90 per cent of India's fuel market, 'voluntarily' have not changed petrol, diesel and cooking gas (LPG) prices, resulting in losses when input costs were higher and profits when raw material prices were lower.

They posted a combined net loss of Rs 21,201.18 crore during April-September 2022 despite accounting for Rs 22,000 crore announced but not paid LPG subsidy for the previous two years.

Subsequent softening of international prices and government giving out LPG subsidies helped IOC and BPCL post annualised profit for 2022-23 (April 2022 to March 2023), but HPCL was in the red. In FY24, things have changed dramatically, and the three firms posted record earnings.

Against Rs 5,000 crore provided in the 2023-24 budget for filing the strategic oil reserves, Rs 40 crore was the expenditure in the revised number of the year and nil in the budget for 2024-25, according to the budget documents.

The budget also made a provision of Rs 11,925 crore towards LPG subsidy in 2024-25 compared to Rs 12,240 crore spending in the previous year.

The provision for FY25 includes Rs 9094 crore for providing cooking gas connection to poor households and Rs 1,200 crore towards subsidy for the northeastern region.

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