FinMin gives Rs 15,000 cr more in fuel subsidy

The Finance Ministry has sanctioned an additional Rs 15,000 crore to partially compensate state-owned oil firms for losses they incur on selling fuel below cost.

"The Ministry of Finance has sanctioned an additional compensation of Rs 15,000 crore on November 11," a top Oil Ministry official said, adding this compensation is over and above Rs 15,000 crore sanctioned for meeting losses of first quarter ending June 30.

Oil marketing companies (OMCs) have reported an under- recovery (revenue loss) of Rs 21,374 crore in the July- September quarter. Of this, one-third or Rs 7,124 crore, would be made good by upstream firms like Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL).

The Finance Ministry was asked to make good the rest Rs 14,250 crore.

"The Finance Ministry has issued the sanction letter and the actual cash would be given the oil companies after the Parliament approves supplementary demands for grants in the winter session of Parliament beginning November 22," he said.

Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) had lost Rs 43,526 crore in April-June quarter on selling diesel, domestic LPG and kerosene at government controlled rates which are way below cost.

The Oil ministry had asked for Rs 29,000 crore cash subsidy for Q1 but got only Rs 15,000 crore.

In the April-September period, the three firms lost Rs 64,900 crore on selling the three fuels below cost.

The three firms are currently losing Rs 11.44 per litre on diesel, Rs 26.94 per litre on kerosene sold through the public distribution system (PDS) and Rs 260.50 per 14.2-kg LPG cylinder supplied to domestic households for cooking purposes.

"The oil marketing companies are currently incurring a daily under-recovery (revenue loss) of about Rs 360 crore on sales of diesel, PDS kerosene and domestic LPG," he said.

If the prices are not revised, the oil firms will end the fiscal with a total revenue loss of about Rs 130,000 crore.

"Financial condition of oil companies is very fragile, we have been pleading for higher government compensation to the oil marketing companies," he said.

The Oil Ministry, he said, wanted the upstream share be limited to historic one-third or 33.33% of the total under-recovery or revenue loss. The Finance Ministry, however, wants the contribution by ONGC, OIL and GAIL India to increase to at least 50%.

"If we can confine the burden (of upstream firms) to 33.33%, we will be lucky," he said.

In first two quarter, ONGC, OIL and GAIL bore roughly one-third of the Rs 64,900 crore under-recovery. With the latest sanction, the government has agreed to give Rs 30,000 crore and the rest was absorbed by retailers.