The Indian petroleum industry is going through a phase wherein on the one side it is saddled with tax woes arising out of the goods and services tax, and on the other is facing flak for the rising petrol and diesel prices. Sanjiv Singh, who took over as the chairman of Indian Oil Corp (IOC) earlier this year, talks about these issues in an interview with Saurabh Kumar. Edited excerpts:
Is the Capex plan of the company on track?
We have a capex plan of Rs 20,000 crore for this year spanning across different heads such as refineries, pipelines as well as marketing. In fact, the expenditure may be slightly above our original plan. We are implementing a lot of work for BS VI implementation at refineries. Lot of work is being done in the marketing filed also such as making OISD-complaint terminals and modernising terminals. A lot of investment is also being made in LPG network enhancement.
How is GST affecting the company and do you think all petroleum products will come under GST?
While the exact numbers will be clearer only over time, but we definitely estimate an impact of Rs 4,000-6,000 crore annually. There has been some benefits as well. A lot of suppliers, vendors and contractors are passing on some GST benefits to us, though the amount is much smaller. Maybe with their numbers also getting clear over time, these numbers will firm up as well. We have been talking to the ministry as well as the GST Council. In the long term, we hope that all petroleum products will come under the GST, but till that happens definitely there is a negative impact on the oil industry.
What has been the response of the council?
Immediately, it has not been indicated that it (all petroleum products under the GST) will be considered, but in-principle everyone agrees on this. We had also been approaching state governments and while they are concerned about their revenue being protected, extra burden should also not come on us. We have been talking to states where our operations are high or we have refineries. The response has been okay but we are yet to see results.
Are you looking to buy more LNG?
Not only us, the country has plans for LNG. There is a lot of space for gas-based operations — whether we talk about utilisation of gas in our own refineries, fertiliser plants, factories, CGD, PNG — a lot of infrastructure is being built by not only IOC but other companies as well. Significant investments are being made for LNG import terminals such as Dhamra and Ennore.
To match with that, companies are also booking LNG capacities and sourcing is being firmed up. The import capacity also has to be in line with what we can sell as well as consume internally. We are also planning to increase gas consumption within our refineries as well. The advantage with IOC is that we are a large anchor customer which allows us to establish robust infrastructure for our internal consumption while also grow outwards to other customers. We have long-terms contracts with Qatar, Gorgon and the US, and we are buying from the spot market as well.
Has IOC thought of acquiring any other company in line with plans for creating mega companies?
We have evaluated various options. We looked into Oil India and GAIL (India) as well. However, options are open as any such move has pros and cons. Though nothing has been firmed up but we have looked into couple of opportunities. The process was done internally. We have to see which handshake makes value addition. It has to be a win-win for both the parties. Once we find that a particular business makes sense, then probably we will come to what value we can offer to such mergers. That would be the stage when we will need external consultants to value the proposition. We have not decided on time line for the merger.
How are your overseas investments in exploration doing?
Our major acquisitions last year was in Russian Taas and Vankor, both are producing assets. Apart from that we have gas coming from Canada apart from minor investments. These investments have starting giving dividends. Our share from Vankor is 2 MT and Tass is around 1.5 MT. We are open to more fields. It is a continuous process and we keep evaluating.