Govt caps kerosene subsidy at Rs 12/ltr, LPG at Rs 18/kg

OMCs to bear Rs 2.95-a-litre gap between under-recovery and subsidy in the case of kerosene; no burden on account of LPG

Government has capped the subsidy payout on kerosene at Rs 12 per litre and domestic cooking gas (LPG) at Rs 18 per kg, Oil Minister Dharmendra Pradhan said today.

Kerosene through public distribution system (PDS) is sold at Rs 14.96 per litre against the actual cost of Rs 29.91. The difference between the two, Rs 14.95 per litre, is termed as under-recovery or revenue loss.

While the government will provide Rs 12 to meet most of this, the remaining Rs 2.95 will be borne by oil producers ONGC and Oil India Ltd, he said.

Similarly, there is an under-recovery or loss of Rs 167.18 on sale of every 14.2-kg subsidised LPG cylinder at the current price of Rs 417.82. At current rates, all of the under-recovery is within the sanctioned subsidy limits.

Pradhan said, at present, the state-owned fuel retailers incur under-recoveries on sale of PDS kerosene and subsidised domestic LPG only as petrol and diesel have been deregulated (market-linked) with effect from June 2010 and October 2014 respectively.

For 2015-16, "the government has approved budgetary support for PDS kerosene under-recovery at a rate of Rs 12 per litre and the remaining under-recovery will be borne by the upstream companies.

"The government has approved a fixed subsidy of Rs 18 per kg under the Direct Benefit Transfer for domestic LPG," he said in a written reply to a question in Lok Sabha.

For the first quarter of FY16, the government will provide Rs 1,733 crore cash subsidy as per the new formula to Indian Oil Corp (IOC), Rs 404 crore to Bharat Petroleum Corp Ltd (BCPL) and Rs 451 crore to Hindustan Petroleum Corp Ltd (HPCL).

On LPG, the subsidy support to IOC would be Rs 2,506 crore, BPCL Rs 1,155 crore and HPCL Rs 1,183 crore, he said.

At current prices, the upstream companies will have to bear about Rs 5,000-6,000 crore kerosene subsidy for the full year.

As many as 12 LPG cylinders of 14.2-kg are supplied to every household at a subsidised rate of Rs 417.82. There is an under-recovery of Rs 167.18 per cylinder, which the government will bear entirely.

"Since the government has launched the direct benefit transfer (DBT) for LPG, wherein cash subsidy is transferred from the exchequer directly to cooking gas consumers, the finance ministry has decided to bear it entirely," an official said.

LPG consumers get subsidy equivalent to the under-recovery directly in their bank accounts so that they can purchase a 14.2-kg bottle at market price of Rs 585.

The official said 2015-16 Budget has provided for Rs 22,000 crore towards LPG subsidy and another Rs 8,000 crore on kerosene.