India to compensate oil companies for revenue loss

Oct 22, 2010 12:00 AM

The government will give Rs 10,000 crore to state fuel retailers for selling fuel below cost in the first half of the current fiscal.

Indian Oil, Bharat Petroleum and Hindustan Petroleum lost about Rs 31,600 crore in revenues on selling diesel, domestic LPG and kerosene below imported cost. "Of this under recovery, the government will bear Rs 10,000 crore," an official said.

Upstream firms Oil and Natural Gas Corp (ONGC), Oil India and GAIL India will bear about Rs 11,000 crore and the remaining revenue loss would be borne by the fuel retailers. "Cash compensation will be released once the Parliament approves supplementary demands for grant in the coming winter session of Parliament," he said.

The compensation is lower than Rs 15,800 crore, or roughly half of the revenue loss, that oil ministry was seeking. In the July-September quarter, ONGC will see its fuel subsidy bill climb by nearly 15 % to Rs 3,019 crore. IOC, BPCL and HPCL together lost about Rs 11,295 crore in revenues on selling diesel, domestic LPG and kerosene below cost of production in July-September quarter, he said. "Of this under recovery, upstream companies like ONGC, Oil India and GAIL India will bear one-third," official added. As per this subsidy sharing formula, ONGC will chip in with Rs 3,019 crore by way of discount on crude oil it sells to IOC, BPCL and HPCL.

The subsidy outgo of ONGC will be Rs 2,630 crore higher than last fiscal's second quarter. The official said OIL will pay Rs 399 crore in subsidy during Q2 of this fiscal and GAIL Rs 346 crore. Of the Rs 3,765 crore upstream subsidy contribution, IOC will get Rs 2,135 crore, HPCL Rs 808 crore and BPCL Rs 821 crore. While, petrol price was freed from the government control in June, state oil firms continue to sell diesel, domestic LPG and kerosene at government dictated price which is substantially lower than the cost of production. IOC, BPCL and HPCL currently lose Rs 2.01 per litre on diesel, Rs 15.52 per litre on kerosene and Rs 188.47 per cylinder on LPG.

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