Government has capped the subsidy payout on kerosene at Rs 12 per litre and Rs 18 per kg for LPG while deciding to foot the entire bill on domestic cooking gas and also notifies that at current prices the upstream companies to bear about Rs 5,000-6,000 crore kerosene subsidy for the current fiscal year. In the budget 2015-16, government had provided for Rs 22,000 crore towards LPG subsidy and 8,000 crore on kerosene.
Currently, in public distribution system (PDS) kerosene is sold at Rs 14.96 per litre against its actual cost of Rs 29.91, where the difference Rs 14.95 per litre, is called as under-recovery or revenue loss. This under recovery loss of Rs 14.95 per litre initially was paid by government to state owned retailer ONGC and Oil India. As per the new cap, the government will pay Rs 12 per liter where the difference of Rs 2.95 will be borne by oil producers ONGC and Oil India.
For LPG cylinder government has fixed subsidy of Rs 18 per kg and as many as 12 LPG cylinders of 14.2-kg are provided to every household at a subsidized rate of Rs 417.82 against market price of Rs 585. There is an under-recovery of Rs 167.18 per cylinder which will be paid entirely by the government under the Direct Benefit Transfer (DBT) scheme, under which the cash subsidy is transferred from the exchequer in the bank account of the consumer so that they can purchase the cylinders at market price.
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 (BCPL) and Rs 451 crore to Hindustan Petroleum Corp (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.