Budget 2019 India: As per ICRA’s estimates, there may be a shortfall of around Rs 31,000 crore in fuel subsidy for FY2019-20 versus the subsidy of Rs 33,500 crore provided for FY2019-20 (BE). This is largely on account of opening arrears of Rs 33,000 crore, which the govt had not paid the OMCs in 2018-19 on account of under-provisioning of subsidy. As per ICRA’s estimates, the subsidy requirement for FY2019-20 will be Rs 31,500 crore, assuming Indian basket crude price of $70/bbl and INR/USD of 70. While the subsidy provided for FY2020 is adequate, the backlog will remain, necessitating high working capital borrowings for PSU OMCs. Hence the under-provision of subsidy will be a marginal credit negative for PSU OMCs. Any sharp fall in oil prices and INR appreciation will offer OMCs some relief.
