Capex plans set to impact OMC profits

Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum have announced plans to invest a cumulative Rs 2.9 lakh crore between fiscal years 2020-24.

Published: 11th September 2019 08:02 AM  |   Last Updated: 11th September 2019 08:02 AM   |  A+A-

Indian Oil Corporation

For representational purposes

Express News Service

NEW DELHI: INDIA’s three state-run oil marketing companies (OMC) stand the risk of taking substantial hits to profitability over the near term due to a sharp increase in planned capital expenditure (capex) in a weak demand environment. Analysts note that Indian Oil Corporation Ltd (IOCL), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) intend to increase their spending on projects by a whopping Rs 1.1 lakh crore over the next five years compared to the previous half-decade.

The three OMCs have announced plans to invest a cumulative Rs 2.9 lakh crore between fiscal years 2020-24, against the Rs 1.8 lakh crore they spent between FY15-19. The sharp increase in capex is in line with the Centre’s recent diktat to central public sector enterprises (CPSE), with the finance ministry stating the ministry has held meeting with CPSE chiefs “in order to boost capital expenditure of the government and pump liquidity into the market to boost demand”.

With the country’s gross domestic product growth slowing for five consecutive quarters — from 8 per cent in Q1, FY19 to just 5 per cent in Q1, FY20 — the government intends to use increased public sector undertaking (PSU) capex as a tool to boost flagging growth.

However, for the three PSU OMCs, this could mean increasing pressure on profitability and a rise in debt levels. The delays in payment of direct benefit transfer (DBT) subsidy dues from the government is also expected to exacerbate the pressure on profit margins.


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on are those of the comment writers alone. They do not represent the views or opinions of or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp