Losses incurred by Indian oil marketing companies (OMCs) on subsidised sales of petroleum products have shrunk by a massive 70% to Rs 21,900 crore in the current fiscal so far (April-December 2015) against under-recoveries of Rs 67,091 crore in the same period last fiscal.
The decline in under-recoveries, caused by the ongoing historic slump in global crude oil prices, indicate the size of the expected windfall for the government on petroleum subsidy front.
OMCs lost Rs 12,000 crore on cooking gas in the first nine months of current fiscal, a 65% drop from Rs 34,000 crore in same period last fiscal.
“Total liquefied petroleum gas (LPG) under-recoveries include under-recovery on direct benefit transfer in LPG (DBTL) of Rs 4,854 crore in the first quarter, Rs 3,953 crore in the second quarter and Rs 3,278 crore in the third quarter,” the oil ministry said. Under the DBTL scheme, the government has so far transferred more than Rs 28,200 crore as direct cash to 150 million households.
Meanwhile, OMCs lost Rs 10,000 crore on subsidised sales of kerosene during the April-December 2015 period, a 52% reduction over Rs 21,000 crore of kerosene under-recoveries registered in the same period last year. The government is currently in talks with eight states to rollout a DBTL-like scheme for transferring kerosene subsidy directly into beneficiary bank accounts.
The petroleum ministry has also asked oil companies to cap LPG subsidy initially to individuals with income level of more than Rs 10 lakh per annum through self-declaration by telephone or text messages on mobile phones. The firms have been asked to ensure the exercise targets only the rich. The exercise is expected to begin initially from ten cities including Delhi-NCR, Mumbai, Chennai, Bengalaru, Hyderabad, Pune, Kolkata, Ahmedabad, Lucknow and Chandigarh.
Global crude oil prices slumped to a historic low of $33 per barrel from more than $100 per barrel in June 2014 owing to a global supply glut amid severe demand reversal in major emerging economies. Riding on the price fall, OMCs’ under-recoveries have come down from Rs 1,39,000 crore in 2013-14 to Rs 72,000 crore last fiscal. Given the trend, the firms are expected to end the current financial year next month with total under-recoveries of around Rs 25,000 crore.
The government’s total petroleum subsidy stood at Rs 62,000 crore last fiscal as compared to the budgeted Rs 65,000 crore. In the current financial year, the government has budgeted for a total fuel subsidy outgo of Rs 30,000 crore while the actual outgo is again expected to be lower.