The budget cycle is upon us. The finance minister will have a strong deck of cards to play with when he addresses Parliament later this month. The economy has clocked up another year of robust growth; inflation is under wraps; interest rates are a concern but they have not yet strangulated credit growth; the balance of payments is healthy and the fiscal deficit is narrowing. The minister will no doubt compliment all those that have contributed to this positive story. He will, however, not mention the oil companies.

For while they have indeed bolstered his exchequer by paying taxes far in excess of what he had anticipated, he knows that in consequence they are now in dire financial straits. He knows that the losses that these companies have racked up on account of the administrative cap on product prices and the ad valorem taxes levied on their transactions, and which through accounting jugglery he will keep outside his budget arithmetic, will have to be paid one day. He cannot in good conscience, therefore, thank the oil companies for contributing to his story.

In failing to acknowledge the nexus between the parlous financial health of the oil companies and the robustness of the government’s exchequer, the FM is not only sidestepping the immediate costs that his successors will have to bear but also the consequential long-term financial implications. My concern stems from the thought that the public sector oil companies that are staring at a Rs 60,000 crore hole in their balance sheet can hardly be expected to look beyond the immediate. But that the two more serious concerns today — environmental degradation and energy security — can only be addressed if inter alia the companies manage the present without losing sight of the future.

... contd.