OilMin seeks Rs 14,250 cr cash subsidy

The Oil Ministry has asked for a cash subsidy of Rs 14,250 crore from the Finance Ministry to partially compensate state-owned oil firms for losses they incur on selling fuel below cost, a senior official said today.

"Oil marketing companies (OMCs) have reported an under-recovery (revenue loss) of Rs 21,374 crore in the July-September quarter," Oil Secretary GC Chaturvedi said at the Economic Editors Conference here.

Of this, one-third or Rs 7,124 crore, would be made good by upstream firms like Oil and Natural Gas Corporation (ONGC) and Oil India (OIL).

"For the rest Rs 14,250 crore, we have asked Finance Ministry to give cash subsidy," he said.

Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (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.

Chaturvedi said his ministry had asked for Rs 29,000 crore cash subsidy for Q1 but got only Rs 15,000 crore.

"We haven't yet heard from Finance Ministry on how much they will provide for Q2," he said.

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

The three firms are losing Rs 7.06 per litre on diesel, Rs 25.90 per litre on kerosene sold through the public distribution system (PDS) and Rs 270.50 per 14.2-kg LPG cylinder supplied to domestic households for cooking purposes.

"The OMCs are currently incurring a daily under-recovery (revenue loss) of about Rs 272 crore on sales of diesel, PDS kerosene and domestic LPG," Oil Minister S Jaipal Reddy said.

For the full fiscal, the three firms are projected to lose Rs 1,21,571 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.

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 Q1, ONGC, OIL and GAIL bore roughly one-third of the Rs 43,526 crore under-recovery. The government agreed to give about Rs 15,000 crore and the rest was absorbed by retailers.

Of the Rs 14,508.83 crore provided by upstream firms, ONGC gave Rs 12,046.26 crore, Oil India Rs 1,780.65 crore and GAIL India Rs 681.92 crore.

No subsidy sharing mechanism has yet been decided for Q2.