Higher under-recoveries by oil cos could hurt budget - Citi

MUMBAI Mon May 10, 2010 5:06pm IST

A bank employee counts currency notes at a cash counter inside a bank in Agartala February 26, 2010. REUTERS/Jayanta Dey/Files

A bank employee counts currency notes at a cash counter inside a bank in Agartala February 26, 2010.

Credit: Reuters/Jayanta Dey/Files

Related Topics

MUMBAI (Reuters) - The positive response to India's 3G spectrum auctions is seen cushioning this year's budget but higher under-recoveries for oil companies due to rising oil prices could play spoilsport, Citigroup said in a note on Monday.

Citigroup said the federal budget estimates 3G and broadband wireless access (BWA) auction receipts at 360 billion rupees.

However, with proceeds from 3G itself crossing 516 billion rupees and BWA likely to raise about 100 billion rupees, revenues from telecom auctions would provide a cushion of 300 billion rupees on the non-tax revenue front, it said.

On the other hand, higher oil prices and lack of adjustment in domestic prices could result in under-recoveries rising from 460 billion in 2009/10 to 1,000 billion rupees in 2010/11 -- which could put pressure on the federal budget, Citi said.

The government has formed an empowered group of ministers headed by Finance Minister Pranab Mukherjee to work out a mechanism for oil price deregulation, which is expected to reach a decision by May and would be key in determining the extent of under-recoveries.

The government has also pegged the divestment receipts at 400 billion rupees and it is on track to achieve those targets but a key concern is the continued market appetite for public offers, particularly in the wake of contagion risks from EU-periphery economies, it said.

(Reporting by Neha D'silva; editing by Sunil Nair)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Canada Shooting

Canada Shooting

Attack on parliament, killing of soldier stun Canada's capital.  Full Article 

Earnings Season

Earnings Season

Wipro sees rosier end to year as U.S. clients spend.  Full Article 

Business Climate

Business Climate

Fears for tough penalties grow as India cleans up business  Full Article 

New Email Service

New Email Service

Google launches new email service dubbed "Inbox".  Full Article 

DLF Appeals

DLF Appeals

DLF seeks interim relief from capital market ban  Full Article 

Falling Oil Prices

Falling Oil Prices

Indian consumers respond to softer oil, food prices  Full Article 

Book Keeping

Book Keeping

RBI fires warning shots on companies' lack of FX hedging.  Full Article 

Policy Repo Rate

Policy Repo Rate

Most external members suggested rate cut in RBI's Sept review.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage