Rating agency Moody’s has cautioned the government against any roll back in diesel prices in the face the rising opposition to the reform measures.
The increase in diesel prices and the limit imposed on subsidised sale of LPG cylinders will decrease the government’s fuel subsidy for the full year by Rs 20,000 crore, Moody’s has estimated.
“If the government rolls back a part of the hike, as some coalition partners and members of opposition parties have demanded, the decline in subsidies will be smaller,” it said in a note on Thursday.
It has cut the fuel subsidy estimate for the full year to 1.7 lakh crore from the earlier estimate of 1.9 lakh crore.
Even the revised estimate is 23 percent higher than the actual subsidy of Rs 1.4 lakh crore registered in 2011-12.
Accordingly, state-run Indian Oil Corporation is likely to see a fall in its debt balance to Rs 1 lakh crore from the earlier estimate of Rs 1.1 lakh crore, Moody’s said.
ONGC, the state-run upstream company, is expected to witness a Rs 6500 crore increase in its subsidy, which will consequently lower its expected revenue. Its EBITDA is likely to decline by the same amount, it said.
“We expect ONGC to share about 32 percent (same as the last fiscal year) of the total subsidy for the full fiscal year, which means that the company’s share of the subsidy burden will still be about Rs 54,000 crore for the current fiscal year versus Rs 44,500 crore a year ago,” the rating agency said.