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Oil ministry wants Rs 56,600 crore more as cash subsidy

23 Nov 2011 Evaluate

In the wake of recent decline of Indian rupee against American dollar, the ministry of petroleum wants Rs 56,600 crore more in cash subsidy to partially compensate the government owned oil marketing companies for losses they incur on selling fuel below market cost.

G C Chaturvedi, Oil Secretary said that “at the current rates, under-recoveries (revenue loss) of oil marketing companies (OMCs) in the current fiscal is likely to be of the order of Rs 1,30,000 crore.”The Oil Ministry wants the share of upstream companies like Oil and Natural Gas Corp (ONGC) to be limited to one-third of this revenue loss, or Rs 43,329 crore. “We would like their share to be one-third. The rest we want the Finance Ministry to bear,” Chaturvedi said.

In the first half of the current financial year, the upstream companies ONGC, Oil India and GAIL bore one-third of the Rs 64,900 crore revenue losses on fuel sale. The finance ministry only gave Rs 30,000 crore and rest was borne by oil refiners, Indian Oil, Bharat Petroleum and Hindustan Petroleum. In the first half of 2011-12, the OMCs have suffered revenue loss of Rs 64,900 crore on selling diesel, kerosene and domestic cooking gas below market price.

Presently, OMCs are losing Rs 11.44 per litre on diesel, Rs 26.94 per litre on kerosene sold via the public distribution system (PDS) and Rs 260.50 per 14.2kg LPG cylinder supplied to domestic households for cooking purposes. As a result, the OMCs are incurring a daily revenue loss of around Rs 360 crore on sale of these three petroleum products. If the prices of these products are not revised, then by the end of the 2011-12, OMCs are expected to incur revenue loss of around Rs 130,000 crore.

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