The government will dole out Rs 38,500 crore additional cash subsidy to public sector oil companies as part of compensation for selling diesel, domestic LPG and kerosene below cost in 2011-12 fiscal.
"Yes, the Finance Ministry has agreed to give Rs 38,500 crore compensation for the January-March quarter," a top oil ministry official said here.
The cash payout would be on top of Rs 45,000 crore that Indian Oil Corp (IOC), Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL) got for the first nine months of 2011-12 financial year.
The three firms had lost a record Rs 1,38,541 crore on selling diesel, domestic LPG and kerosene at government- controlled rates that were way lower than market price. Together with the additional payout agreed, the government will make up 60% or Rs 83,500 crore of the total revenue loss.
Upstream companies Oil and Natural Gas Corp (ONGC), Oil India and GAIL India have been asked to shell out an additional Rs 1,640 crore ¿ over the Rs 53,360 crore indicated earlier ¿ as their share of the subsidy burden.
The cash subsidy and assistance from upstream oil companies would bridge almost all of the Rs 1,38,541 crore of revenue loss, the official said. "Without this, the three companies would have for sure posted huge losses."
IOC is to declare its fourth and 2011-12 annual financial results on May 28, while HPCL would do so on May 29. BPCL has scheduled a board meeting for the results on May 25.
ONGC, OIL and GAIL had in April-December 2011 contributed Rs 36,894 crore towards fuel subsidy and they would provide another Rs 18,106 crore in the fourth quarter.
"The share of upstream companies (in total under recoveries or revenue loss) works out to be 39.7%. In 2010-11, they had borne 36.75% of the under recoveries," he said.
Besides losses on diesel, domestic LPG and kerosene, state fuel retailers also lost Rs 4,890 crore on sale of petrol, a commodity which was decontrolled in June 2010 but rates of which haven't been raised due to political considerations.
The oil marketing companies also incurred an interest payout of Rs 4,800 crore due to delay in payment of cash subsidy by the government, the official said, adding that both of these demands have not been met by the Finance Ministry.
"So in effect, the share of oil marketing companies would be the loss they incurred on sale of petrol and the interest outgo," he said, adding that the Oil Ministry had asked for Rs 49,870 crore to compensate the three firms for selling fuels at government-controlled rates, and towards interest compensation.