The Ministry of Petroleum & Natural Gas (MoPNG) has consistently increased its spending on the sectors of Refinery & Marketing (R&M) and Petrochemicals in the last six fiscal years, beginning FY20. However, spending on exploration and production (E&P) has declined.
The Ministry under the sub head ‘Investment in public enterprises’ provides details about its investment plans for CPSUs in R&M, Petrochemicals, E&P and Engineering.
In FY25, under investment in public enterprises, it allocated a cumulative ₹1,19,402.52 crore. Of this, R&M has been allocated ₹57,451.04 crore followed by ₹50,382.49 crore (E&P), ₹10,850.94 crore (Petrochemicals) and ₹90 crore (Engineering).
Budgetary spending
Comparing Budget Estimates (BE) of last six fiscal years reveals that investments in E&P (out of the total) fell from 52.39 per cent in FY20 to 42.20 per cent in FY25. On the other hand, R&M investments grew from 42.10 per cent in FY20 to 48.12 per cent in FY25. Similarly, in Petrochemicals, the allocation rose from 4.21 per cent to 9.08 per cent.
Analysing Revised Estimates (RE) also shows a similar pattern. Investments in E&P fell from 51 per cent of the total in FY20 to 43.16 per cent in FY24. However, R&M investments rose from 44.98 per cent to 48.57 per cent. In Petrochemicals also investments rose from 3.81 per cent to 8.14 per cent.
In FY24, the allocations for E&P and R&M declined to 34.15 per cent and 38.90 per cent—the lowest since FY20 as government had provided a capital infusion of Rs 30,000 crore (BE), which was 21.91 per cent of the total investment in public enterprises.
Girishkumar Kadam, Senior VP & Group Head (Corporate Ratings) at ICRA, said “Capital support of Rs 30,000 crore was provided for energy transition projects to oil marketing companies in BE FY24 and the same was reduced to Rs 15,000 crore and shifted to FY25 in interim budget. This is reduced to almost nil which would result in negligible support to OMCs.”
Evolving priorities
Even as spending on E&P fell in last six years, MopNG has become aggressive with its focus on increasing domestic oil and gas production. Ashwin Jacob, Partner and Energy, Resources & Industrial industry leader at Deloitte India, agrees.
“Government has largely ensured continuity in its stated goal of encouraging domestic hydrocarbon production. This includes measures like formation of a Joint Working Group comprising representatives from private E&P operators, National Oil Companies, MoPNG and Directorate General of Hydrocarbons,,” he added.
Besides, focus on R&M sector is critical for the country considering India’s refined petroleum products consumption, particularly of diesel, petrol and jet fuel, has been growing consistently aided by growing industrial & commercial sectors and rising air travel as well as growing private vehicle ownership.
The world’s fourth largest refiner is also a major exporter of transport fuels, particularly to Europe, which has added to the income of domestic refiners. Developing the petrochemicals sector will also provide a consistent revenue stream to the PSU refiners.
India imports around 87 per cent of its crude oil requirement and roughly half of its natural gas consumption.