ONGC, OIL subsidy burden rises 42% in one quarter

The subsidy burden of upstream oil companies, Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL), have risen 42 per cent in a single quarter. In the third quarter of 2009-10, the subsidy burden on ONGC and OIL was Rs 3,497 crore and Rs 467 crore, respectively. In the fourth quarter ended March 31, it increased to Rs 4,999 crore and Rs 662 crore, respectively, on higher auto-fuel losses of oil marketing companies (OMCs), said a government official.

The higher subsidy obligation will be a drag on the financial performance of these companies. Both of them are scheduled to announce their fourth quarter and annual results of 2009-10 by the month-end.

Meanwhile, the subsidy obligation of GAIL has remained constant at Rs 397 crore. While the OMCs — Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum — purchase crude at internationally benchmarked prices, the sale price of products like petrol, diesel, kerosene and LPG are not maintained in line with the international rates. This causes a revenue loss for the companies. The OMCs’ revenue loss on the sale of these products during 2009-10 is estimated to be Rs 46,000 crore.

Under the burden-sharing mechanism for 2009-10, the upstream oil companies are required to fully compensate the loss on petrol and diesel, estimated at Rs 14,400 crore. The loss of Rs 31,600 crore on kerosene and LPG is supposed to be made good by the government. Out of this, Rs 26,000 crore has already been compensated to the OMCs in cash. The balance will have to be absorbed by the OMCs.
 

DROOPING SHOULDERS
Company	Subsidy burden in 2009-10 (Rs crore)
	Q1	Q2	Q3	Q4
ONGC	429	2,630	3,497	4,999
OIL	241	149	467	662

Crude prices have been steadily rising for the last few months, and along with it the losses of OMCs. In early December last year these companies were losing Rs 3.68 on every litre of petrol and Rs 2.90 on every litre of diesel. By March-end, the losses on petrol and diesel had surged to Rs 5 and Rs 3, respectively.

During the first fortnight of the current month, the OMCs were losing Rs 6.63 on every litre of petrol, while the loss on every litre of diesel and kerosene was Rs 6.25 and Rs 19.74, respectively.