Kerosene sop formula talks on with states: Watal

Expenditure Secretary Ratan Watal on Friday countered reports that the government would have to spend Rs 10,000 crore extra in fuel subsidies this year. Modalities of kerosene and liquified petroleum gas (LPG) subsidies were still being worked out, he said at a press conference.

The government pays LPG subsidy directly to the bank accounts of users. For kerosene, a formula is being discussed with states, Watal said, adding that Rs 22,000 crore has been provisioned in the Budget for LPG subsidy. The budgeted fuel subsidy stands at Rs 30,000 crore.

On Friday, ONGC Chairman D K Saraaf said at another event that the petroleum ministry had worked out a formula for sharing OMCs' under-recovery burden by upstream firms in the April-June quarter of the financial year. Under the new formula, upstream firms would be exempted from sharing the burden if crude oil prices remained below $60 a barrel. For crude rates between $60 and $100 a barrel, upstream firms would have to share 15 per cent of the excess burden. In case the crude oil price averaged above $100 a barrel, upstream firms would share 10 per cent of the excess burden.

The finance ministry has sanctioned Rs 5,223 crore as fuel subsidy for the January-March quarter to cover almost all of the revenue losses suffered on selling domestic cooking gas (LPG) and kerosene at government rates.

With this, the total subsidy provided by the government in 2014-15 goes up to Rs 27,308 crore. For the first three quarters, the government had provided Rs 22,085 crore. Fuel retailers had lost Rs 72,314 crore on selling diesel (up to October 17), LPG and kerosene at government rates, which were way below cost in 2014-15. Most under-recoveries, or revenues retailers lost on selling fuel below cost, of Rs 67,091 crore in the first nine months of the financial year were accounted for by the subsidy support and dole out from upstream firms like ONGC. While the government gave cash subsidy of Rs 22,085 crore, upstream oil producers ONGC, OIL and GAIL chipped in with Rs 42,822 crore.