BPCL’s Rs 17,Crore Plan to Fuel Renewable Energy and Combat Climate Change
BPCL (Bharat Petroleum Corporation Limited), one of India’s leading oil refining and marketing companies, has embarked on an ambitious journey towards achieving net-zero carbon emissions. In line with its commitment to sustainability and environmental responsibility, BPCL seeks to raise Rs 17,000 crore to fund its net-zero plans.
This significant investment will propel the company’s transition towards cleaner energy sources and reinforce its position as a responsible corporate citizen.
Bharat Petroleum Corporation (BPCL), announcing a process of equity capital infusion by state-run oil marketing businesses in their quest to finance their carbon reduction targets, would shortly conduct rights issues of around Rs 17,000 crore in tranches.
On June 28, the BPCL board of directors will meet to discuss the capital infusion for attaining the energy transition goals, net zero, and energy security. On Friday, the BSE share price of BPCL finished at Rs 359.5, a decrease of 3.74% from the previous closing.
According to the official, “BPCL will receive from the government approximately Rs 9,000 crore in different tranches as it is going for the rights issue of about Rs 17,000 crore.” The petroleum retailer-cum-refiner is 52.98 per cent owned by the Centre.
BPCL’s decision to embrace a net-zero carbon emissions target demonstrates its proactive approach to combating climate change. The company has acknowledged the pressing need to decrease greenhouse gas emissions and has pledged to become carbon neutral by 2050. This goal supports the global initiative to reduce the harmful effects of climate change and move towards an economy with lower carbon emissions.
The government promised to invest Rs 30,000 crore in equity capital in the three OMCs — Indian Oil Corporation (IOC), BPCL, and HPCL — as part of its net-zero and energy transformation goals in the Budget 2023–24, which was unveiled on February 1. The biggest state-owned OMC, IOC, will receive the most significant piece.
It will shortly be decided how much stock will be invested in IOC through a rights issue.
Considering that the market would be sensitive to increased government ownership in these enterprises following the equity infusion, IOC and BPCL had asked for capital support through loans. However, the administration believed that since the government’s ownership would not grow, a rights problem would alleviate their worries.
Investment Objective:
The Rs 17,000 crore investment seeks to drive BPCL’s transformation by funding various initiatives focused on decarbonization, renewable energy, and sustainable business practices. The capital raised will be allocated towards:
- Renewable Energy Projects:
BPCL is working towards decreasing its dependence on non-renewable energy sources by hastening the integration ofSome examples of renewable energy sources include wind and solar power.The funds will support developing and expanding renewable energy projects, including solar farms and wind turbines. This investment will enable BPCL to generate clean energy, reducing its carbon footprint and contributing to India’s renewable energy targets.
- Research and Development:
BPCL plans to allocate some funds to research and development activities to stay at the forefront of sustainable energy solutions. This investment will foster innovation and technological advancements in renewable energy, energy storage, and efficiency. By investing in R&D, BPCL aims to discover cutting-edge solutions to accelerate the transition to a greener energy landscape.
- Infrastructure Upgrades:
The capital raised will also be used to upgrade BPCL’s infrastructure to support cleaner energy alternatives. This includes retrofitting refineries to produce cleaner fuels, improving operational energy efficiency, and implementing sustainable practices across the value chain. These upgrades will enhance BPCL’s operational efficiency while reducing its environmental impact.
- Electric Mobility Initiatives:
Recognizing the potential of electric vehicles (EVs) in reducing carbon emissions from transportation, BPCL plans to invest in EV charging infrastructure. The funds will be used to establish a network of charging stations nationwide, enabling the widespread adoption of EVs. By supporting the growth of electric mobility, BPCL aims to play a vital role in India’s transition to a sustainable transportation sector.
- Sustainable Supply Chain:
BPCL will focus on building a sustainable supply chain by collaborating with suppliers and partners committed to environmental responsibility. The investment will foster sustainable practices throughout the supply chain, ensuring the entire value network aligns with BPCL’s net-zero objectives.
Over 90% of domestic petroleum supplies are supplied by three state-run merchants, each with a direct or indirect government ownership interest of roughly 51%, the minimum percentage needed to qualify as a state-run business. The largest state-owned explorer in the nation, ONGC, holds 54.9% of HPCL, while the Centre owns 51.5% of IOC.
According to the source, the Centre would probably inject funds into HPCL through the preferential allocation of equity shares.
BPCL’s net profit decreased by 79% year over year to Rs 1,870 crore in FY23, while IOC’s net profit decreased by 66% year over year to Rs 8,789 crore due to the inability to pass on the full impact of the hardening global crude prices to consumers. Compared to a net profit of Rs 6,383 crore in FY22, HPCL recorded a loss of Rs 8,974 crore in FY23.
In the first two quarters of the previous fiscal year, they had losses for all three firms, followed by a third quarter with muted net earnings and a fourth-quarter ending in March 2023 with a dramatic profit increase.
Given the reduction in crude oil prices, the OMCs are anticipated to record sizable profits in the current and subsequent quarters (Q1 and Q2FY24).
The government’s intention to privatize BPCL failed in FY22, partly because state-run OMCs restricted their ability to set prices amid global uncertainty in the hydrocarbon market.
The Centre has made a capital investment announcement for projects, including hydrogen plants that would upgrade OMCs’ refineries and reduce emissions.
BPCL’s decision to raise Rs 17,000 crore to fuel its net-zero plans demonstrates its commitment to combating climate change and embracing sustainable practices. The investment will enable BPCL to accelerate its transition towards cleaner energy sources, reduce carbon emissions, and contribute to India’s sustainable development goals.
By spearheading initiatives in renewable energy, research and development, infrastructure upgrades, electric mobility, and sustainable supply chains, BPCL is poised to become a frontrunner in India’s journey towards a greener future. This landmark investment reaffirms BPCL’s role as a responsible corporate entity actively working towards mitigating climate change and fostering a sustainable planet for future generations.
