APN News

  • Sunday, September, 2021| Today's Market | Current Time: 03:21:49
  • Govt hikes upstream oil cos’ subsidy burden on fuel to 38.8 pc

    Published on May 20, 2011

    In a move that may spook Oil and Natural Gas Corp’s (ONGC) planned public offering, the government has hiked the contribution of upstream oil companies toward fuel subsidies to 38.8 per cent for 2010-11 fiscal.

    Of the Rs 78,159 crore revenue that retailers lost on selling diesel, domestic LPG and kerosene below cost in the 2010-11 fiscal, upstream firms ONGC, Oil India and GAIL India have been ordered to contribute Rs 30,296.7 crore, or 38.8 per cent, sources in-the-know of the development said.

    Traditionally, upstream companies made up roughly one-third (33 per cent) of the revenues lost on fuel sales through discounts on crude oil and products they sold to Indian Oil, Hindustan Petroleum and Bharat Petroleum.

    But the oil ministry on Thursday  issued orders raising the upstream contribution to 38.5 per cent, they said, adding that ONGC has been ordered to chip in Rs 24,892.43 crore, while OIL will provide Rs 3,293 crore and GAIL Rs 2,111.24 crore.

    ONGC, which had in the first three quarters of the 2010-11 fiscal provided Rs 12,757 crore in subsidy, has seen its stock price plummet by 11 per cent in anticipation of an increase in its share of subsidy.

    It was down 2.6 per cent at Rs 271.60 on the Bombay Stock Exchange at 1215 hours on Friday.

    The government had planned to sell 5 per cent of its shares in ONGC in a follow-on public offering (FPO) in July to raise Rs 12,000 crore, but at the current price, it may get just over Rs 10,000 crore.

    The government has paid a total of Rs 40,912 crore, or just over half of the revenue loss, in cash subsidy to the retailers.

    Of the upstream subsidy, IOC will get Rs 16,703.73 crore, BPCL Rs 6,960.04 crore and HPCL Rs 6,632.98 crore.

    The three firms will absorb the remaining revenue loss.

    Sources said the share of the upstream firms was increased as the Finance Ministry provided only Rs 20,001 crore in the second installment of the cash subsidy as against the demand of Rs 26,000 crore.

    While petrol prices were freed from the government control in June, state oil firms continue to sell diesel, domestic LPG and kerosene at government-ruled prices, which are substantially lower than the cost of production.

    IOC, BPCL and HPCL currently lose Rs 16.49 per litre on diesel, Rs 29.69 per litre on kerosene and Rs 329.73 per 14.2-kg LPG cylinder.

    In the 2010-11 fiscal, the three firms lost Rs 78,202 crore, but the government provided only Rs 40,912 crore in compensation.

    The oil marketing firms lost Rs 2,227 crore on selling petrol below imported cost during April and June before its price was freed from government control.

    They lost Rs 34,384 crore on the sale of diesel, Rs 19,566 crore on PDS kerosene and Rs 22,025 crore on the sale of domestic LPG.

    The official said at current prices, the total revenue loss in the current fiscal is estimated at Rs 170,676 crore.

    While petrol prices were hiked by a steep Rs 5 per litre last week, an increase in the price of the other products is on the cards to contain the revenue loss.