Govt to commit more funds to meet fuel subsidy burden

Amid high international crude oil prices, the government today said it will commit more funds to meet the oil subsidy bill.

"If there is any requirement of additional [fuel] subsidy, funds would be committed with least impact on the fiscal deficit," Finance Minister Pranab Mukherjee said while meeting large foreign and domestic investors here.

The government has budgeted petroleum subsidy payout of Rs 23,640 crore for the current fiscal. It has fixed the fiscal deficit target for 2011-12 at 4.6% of the GDP.

Mukherjee said, "It is difficult to accurately estimate the burden on the government, especially in view of the volatility in the international crude prices."

So far this year, Brent oil prices have soared by about 21%, largely as a result of the spreading unrest in the crude-producing Middle East and North Africa region — and particularly in OPEC member Libya.

Global crude oil prices, which had topped $125 a barrel, are currently hovering around $115 a barrel.

An Empowered Committee of Ministers, headed by the Finance Minister, is likely to deliberate on oil ministry's demand for a minimum of Rs 4 a litre hike in diesel price and Rs 25 per cylinder increase in LPG rates to partly bridge the gulf between domestic prices and their international cost.

As per the current prices, the state-run companies -- IOC, BPCL and HPCL -- are losing about Rs 14.66 per litre on diesel, Rs 29.69 a litre on kerosene and Rs 329.73 per 14.2-kg domestic LPG cylinder.

In 2010-11, the three firms lost Rs 78,202 crore on account of subsidies, but the government has provided only Rs 40,912 crore in compensation.

The oil marketing firms lost Rs 2,227 crore on selling petrol below the imported cost during April and June last year before its pricing was freed from the government control.

They lost Rs 34,384 crore on sale of diesel, Rs 19,566 crore on PDS kerosene and Rs 22,025 crore on sale of domestic LPG.