Oil companies demand subsidy for petrol losses

Oil marketing companies have not revised petrol prices since December 1, 2011, despite sharp increase in international prices of petroleum products

With losses on sale of petrol climbing to over Rs 7 a litre, state-owned oil firms have asked the government to either provide subsidy on the fuel or reduce excise duty.

"The public sector oil marketing companies have not revised the price of petrol since December 1, 2011, in spite of sharp increase in international prices of petroleum products," Minister of State for Petroleum and Natural Gas RPN Singh told the Lok Sabha here today.

The current retail selling price of Rs 65.64 per litre in Delhi is short of actual cost by Rs 8.60 a litre.

"There is an under recovery of Rs 7.17 per litre on sale of petrol," Singh said. After adding 20% local sales tax or VAT, the desired increase in petrol price comes to Rs 8.60 per litre.

"In order to mitigate losses on sale of petrol, oil marketing companies have, inter alia, suggested to the government to either declare petrol as a 'regulated' product temporarily and provide cash compensation (subsidy) for under- recovery or to reduce the excise duty on petrol from Rs 14.78 per litre by an amount equivalent to the under-recovery on petrol," he said.

Singh, making the submission in a written reply to a question, said his ministry has taken up the matter with the Finance Ministry.

The government had freed pricing of petrol from its controls in June 2010 but rarely have the fuel rates moved in tandem with cost.

Petrol price were last revised on December 1 when the imported cost of the fuel was $109.30 a barrel. Since then global rates have climbed to about $120 per barrel.

At the last revision, oil firms cut rates by Rs 0.65 a litre on top of an earlier price reduction of Rs 1.85 per litre effected from November 16, 2011.

Oil firms had lost Rs 4,859 crore on selling petrol below cost in 2011-12 fiscal. This was over and above Rs 138,541 crore they lost on selling diesel, domestic LPG and kerosene below market price in the fiscal.

"The public sector oil marketing companies have incurred under-recovery (revenue loss) of Rs 138,541 crore during 2011-12, which is 77% more than the under-recovery of Rs 78,190 crore for 2010-11," Singh said.

Of the total under-recovery, the government has so far provided only Rs 45,000 crore in cash subsidy, he said adding in 2010-11, the government gave cash subsidy of Rs 41,000 crore or 52% of the under-recovery.