Government Needs To Reduce Oil Companies Like OIL, ONGC Burden Over Low Margins: Fitch

NEW DELHI: Lower oil prices have reduced net margins of two state-owned upstream companies, Oil India Ltd and ONGC Ltd and the government needs to reduce the burden on them, credit rating agency Fitch.

"We expect the government to intervene to reduce this financial burden on the state-upstream companies in light of the significantly low oil prices, which should ease pressure on their operating cash generation," it said.

Fitch added, however that "to date there has been no action or firm proposals of how to address this issue".

It further said that low energy prices would continue to moderate India's inflation rate, which has already fallen from over 10 per cent in early 2013 to below 6 per cent over the past few months.

"This should lead to lower interest rates, boosting investment," it said.

Fitch said however that in view of deregulation of petrol and diesel prices, Indian consumers will face burden if the cost of global crude oil increase from the current levels.

"Given that both gasoline and diesel prices are now deregulated, consumers in India will face a higher burden should global prices increase from current low levels, than would have been the case under India's previous regulated fuel pricing regime," it said.
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