Depleting cash balances is posing a real threat to the ambitious exploration plans of Oil and Natural Gas Corporation (ONGC). According to a news report in The Financial Express, ONGC will have to dip into the reserve cash balance which has dipped to Rs 7000 crore from Rs 9500 crore in 2012, if it wants to continue its exploration work and meet 90% of its capex target.

According to A K Banerjee, director of finance, ONGC, the company might have to borrow Rs 6000 crore within a few months, the first time in 15 years, if the subsidy burden continued at current level. He added that the company will scrape through 2013-14 on internal accruals but the situation looks grim after that.

“Borrowing overseas might not be feasible right now since hedging costs and the weak rupee make this option unviable,” he was quoted.
ONGC’s finances are already somewhat strained; since its internal accruals this year are expected to be much lower at Rs 27000-28,000 crore post-subsidies, whereas it had hoped to spend close to Rs 35,000 crore on capex.

ONGC’s cash reserves dipped by around Rs 2500 crore last year since it contributed Rs 49,421 crore or 31% of the total under-recoveries of Rs 1.61 lakh crore. Over the last 10 years, ONGC has contributed about Rs 2.16 lakh crore to under-recoveries.