In a major relief to the fuel retailers to cover their revenue losses on fuel sale, the finance ministry has agreed to provide a record Rs 100,000 crore towards diesel and cooking fuel subsidy in 2012-13, however, it wants the pricing formula to be changed from current year to cut down the outgo.
The three retailers such as Indian Oil (IOC), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) lost Rs 161,029 crore in 2012-13 on selling diesel, domestic LPG and kerosene at government controlled rates which are way below market price. Of this, the government has provided Rs 55,000 crore by way of cash subsidy and about Rs 45,000 crore was made good by upstream firms like ONGC.
Meanwhile, there remained unmet under-recovery or revenue loss of about Rs 60,000 crore and the upstream firms are expected to chip in another Rs 15,000 crore, while the rest will come from finance ministry. In 2011-12, oil firms lost Rs 138,541 crore in revenue on fuel sales.
Further, in order to cut the subsidy outgo, the government wants petrol and diesel to be priced at a rate the oil firms get in export market, rather than current practice of pricing the fuels after adding transportation and customs duty to the international price. The difference between the Export Parity Price (EPP) and the currently in vogue Trade Parity Price is about $3-4 per barrels. The government is expected to decide soon on the issues and has referred the matter to Kirit Parekh committee.