The government today sought approval of Parliament to pay Rs 30,000 crore in fuel subsidy to state-run oil firms for the first half of current fiscal.
Finance Minister Pranab Mukherjee presented in Parliament second supplementary demands for grants of Rs 56,848.46 crore, more than half of which was for compensating state-owned oil firms for selling diesel, domestic LPG and kerosene at government-controlled prices.
Indian Oil Corp (IOC), Hindustan Petroleum Corp (HPCL) and Bharat Petroleum (BPCL) had lost Rs 64,900 crore in revenues on selling diesel, domestic LPG and kerosene below cost in April-September period.
Of this, the government will make good less than half of it through cash subsidy after Parliament approves the supplementary demands for grants.
Upstream oil firms like Oil and Natural Gas Corp (ONGC) have already paid Rs 21,633 crore to make up for one-third of the revenue loss. The remaining Rs 13,267 crore would have to be absorbed by the three fuel retailers.
The government had this year not given any subsidy to the fuel retailers. It had only made a promise of Rs 30,000 crore payout for the first half. The delay in the release of the subsidy led to the three retailers posting huge net losses.
IOC posted a net loss of Rs 11,204 crore in April-September period while HPCL reported net loss of Rs 6,444.74 crore for the same period. BPCL had recorded a net loss of Rs 5,791 crore in H1 2011-12.
The three firms currently sell diesel at a loss of Rs 11.44 per litre, kerosene at Rs 26.94 a liter and domestic LPG at a loss of Rs 260.50 per 14.2-kg cylinder.
The government had in 2010-11 paid a cash subsidy of Rs 41,000 crore to the three retailers to make up for more than half of the Rs 78,190 crore revenue loss on fuel sales in the fiscal.
In that year, ONGC and other upstream firms had given out a dole of Rs 30,297 crore.
This fiscal, IOC, BPCL and HPCL are projected to lose a record Rs 130,000 crore on selling diesel, domestic LPG and kerosene below cost. Government would have to provide Rs 65,000-70,000 crore in subsidy in the full year if it continues to provide subsidy at levels it has been doing so in the past.
The government had paid an all-time high subsidy of Rs 71,292 crore in 2008-09 when record international oil price of %147 per barrel had lead to oil firms losing Rs 103,292 crore in revenues.