The government has passed on an additional oil subsidy burden of Rs 4,299 crore to upstream oil companies — ONGC, OIL and GAIL — for 2010-11.
It has asked these companies to bear 38.76 per cent of the total oil subsidy as against the earlier estimate of 33.3 per cent. The burden for 2010-11 is now Rs 30,296 crore.
Despite this, the three oil marketing companies, Indian Oil, Bharat Petroleum and Hindustan Petroleum, will have to bear a loss of Rs 6,951 crore.
In spite of petrol price decontrol early in the year and an increase in diesel prices, oil marketing companies’ losses from selling diesel, kerosene and domestic LPG rose 70 per cent in 2010-11 to Rs 78,159 crore as crude oil prices continued to rise. The loss in 2009-10 was Rs 46,051 crore.
| SUBSIDY PAIN | |||
| 2009-10 | 2010-11 | 2011-12* | |
| Average price of crude (Indian basket) per barrel ($) | 69.76 | 85.09 | 112.32# |
| Total underrecoveries of OMCs (Rs crore) | 46,051 | 78,159 | 174,835 |
| Government’s contribution (Rs crore) | 26,000 | 40,912 | 89,900 |
| Upstream companies’ contribution (Rs crore) | 14,430 | 30,296 | 67,766 |
| Upstream firms’ share (%) | 31.33 | 38.76 | 38.76 |
| Absorbed by OMCs (Rs crore) | 5,621 | 6,951 | 17,169 |
| #for May 1-15, 2011; *Assuming no further price hike at the retail level and current crude oil prices Source: Ministry of Petroleum. OMCs: Oil marketing companies | |||
In addition, the government has paid Rs 40,912 crore, or over half the loss incurred by selling products at subsidised prices, to the marketing companies.
The upstream companies share this burden in the form of discounts to the marketing companies. ONGC’s new burden is Rs 24,892 crore, Rs 3,293 crore more than the earlier estimate.
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It has already paid Rs 12,757 crore for the first three quarters. OIL will have to give discounts worth Rs 3,293 crore while the burden of GAIL will be Rs 2,111 crore.
ONGC Chairman and Managing Director A K Hazarika says this may lead a Rs 2,000 crore fall in net profit when the company declares its fourth-quarter and full-year results this month. ONGC shares touched a 12-week low of Rs 267.50 at the Bombay Stock Exchange on Friday. The market capitalisation of the country’s largest energy company has fallen over 10 per cent in the last one week.
Experts said this could hit the company’s follow-on public offer (FPO), expected to be launched on July 5. The government plans to sell 427.77 million equity shares, or 5 per cent stake, in the FPO. At Friday's closing price of Rs 274, the sale could fetch Rs 11,722 crore.