FY06 subsidy burden seen at Rs12,000 crore: ONGC

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ONGC CMD Subir Raha says the company will be paying more as cess, which means the outgo will go up by about Rs1,800 crore on annualised basis. As per the Budget, the cess has gone up to Rs2,500. What does that mean because yesterday the market reacted negatively to the ONGC stock, fearing that they might actually have to pay even more by way of a subsidy.

The apprehension seems to be that you will pay more than you are paying this year. Is that a fair assumption or the markets have not got it right?
At this moment what the Budget says that we shall be paying more as cess that will go up by about Rs1,800 crore on annualised basis. The Budget did not address the recommendations of the Rangarajan Committee. I would personally hope that those decisions, recommendations would be acted upon.

The committee has recommended the present system of subsidy should be replaced by a transparent system. But at this moment, yes, it means additional outgo of about Rs1,800 crore per year.

So you are saying that only one leg of it has being done. You have been made to pay more cess but on the other hand reducing the burden or making it more transparent on the subsidiary sharing formula has not been laid out.

That has not happened so far. Rangaranjan Committee had said that the additional cess should set-off the subsidy and that would have meant hopefully a neutral impact but that has not happened.

When we had spoken before the Budget, you had made the point that perhaps things would become more clear now in terms of what the net out-go for ONGC would be - has that happened or is it still a question mark in terms of subsidies verses the cess?
As things stand, it would mean that the subsidy regime stays. In the first three quarters we paid about Rs9,000 crore. The annualised impact on that basis would be about Rs12,000 crore and the additional cess does not get set-off against subsidies. That is the way we read the Budget.

So as things stand now it is an additional burden unless you hear more on the other leg as well. Is that a fair assumption or analysis?
That is right.