Gail may not share subsidy burden in 2008

[suguhopes]

GANDHINAGAR: Gail India is unwilling to share the subsidy burden,
according to the company’s chairman.
Talking to ET, Gail chairman & managing director UD Choubey, said:
“Why should Gail share any subsidy burden? We are not an exploration
and production (E&P) firm like ONGC or OIL. We are a mid-stream
company.”

Mr Choubey was in Gandhinagar on Monday to inaugurate the Masters in
Petroleum Management at the Institute of Petroleum Management,
Gandhinagar.

Gail, along with other upstream oil companies such as ONGC and OIL,
have been asked to share subsidies worth Rs 45,000 crore to bail out
bleeding oil marketing companies (OMCs) in the wake of soaring crude
prices. OMCs are incurring heavy losses, thanks to soaring crude
prices. Their combined under-recoveries have been pegged at over Rs 2
lakh crore.

Gail has been sharing the subsidy burden for the past three years. Its
share in the subsidy burden was Rs 1,314 crore last year, Rs 1,488
crore in FY07 and Rs 1,064 crore in FY06. Interestingly, Gail hardly
earns any revenues from its upstream operations.

It is not clear how much Gail’s share in the subsidy burden will be.
But analysts said the company might have to share the burden as the
Centre wants it to do so. They said the move would hit the company
hard. An expert said: “The subsidy-share proposal was mooted when
crude hovered around $123 a barrel. Now with crude breaching $147 per
barrel last week, these companies (Gail, ONGC and OIL) might have to
share a bigger burden as the under recoveries of OMCs are expected to
go beyond Rs 45,000 crore.”

It may be recalled that Reliance Industries had shared subsidy worth
Rs 750 crore in the form of discounts to OMCs in 2006. But the company
was exempted when its petroleum retail business started making losses.
So may be the case with Gail, says another analyst.

Source : Economic Times