The government today approved a Rs 8,000-crore subsidy to the three public sector oil marketing companies to compensate half the revenues they lost on selling diesel, domestic LPG and kerosene below cost for the quarter ending December 31.
The Ministry of Petroleum and Natural Gas had earlier sought Rs 10,000 crore from the finance ministry. “The finance ministry has issued a letter approving Rs 8,000 crore in cash compensation for the October-December quarter,” an oil ministry official said.
Indian Oil Corporation (IndianOil) will get Rs 4,442.45 crore, Bharat Petroleum Corporation Ltd (BPCL) Rs 1,809.85 crore and Hindustan Petroleum Corporation Ltd (HPCL) Rs 1,747.70 crore.
“For the first six months, the finance ministry had approved Rs 13,000 crore and now, with today’s Rs 8,000 crore, the total subsidy so far this financial year is Rs 21,000 crore,” the official said. The amount is yet to be approved by Parliament but would be taken on the books of oil companies on the basis of the government letter and be shown as receivable. This will help them report profit or lower losses.
The government expense on petroleum subsidy has already risen from Rs 3,108 crore to Rs 17,108 crore in 2010-11 even without taking into account Rs 21,000 crore promised to the oil companies. Some of the additional subsidy burden might be taken into government books next financial year as has been the practice in the last few years.
The three companies made a loss of about Rs 16,000 crore on selling diesel, domestic LPG and kerosene below their market price. For the full year, the companies are expected to report a revenue loss of Rs 72,000 crore.
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Of this, upstream firms Oil and Natural Gas Corp (ONGC), Oil India Ltd (OIL) and GAIL India Ltd made up Rs 5,198 crore by way of discounts on crude oil and petroleum products they sell to the three retailers. ONGC chipped in Rs 4,222 crore, OIL Rs 558 crore and GAIL Rs 418 crore.
The three oil marketers had last week postponed announcement of their third-quarter financial results in anticipation of the government subsidy, without which they would have posted losses. IndianOil, which was to announce results on January 25, has now scheduled a board meeting on February 10. Similarly, BPCL has postponed the January 31 board meeting for the third quarter results to February 9, while HPCL put off its January 27 meet to February 11.
The three companies currently lose Rs 6.80 a litre on diesel, Rs 18.66 a litre on kerosene and Rs 366 on each domestic LPG cylinder.