The government will give Rs 14,000 crore in cash to Indian Oil, Bharat Petroleum and Hindustan Petroleum to make up for the losses incurred on selling fuel below cost in the first quarter of 2010-11 fiscal.
The Finance Ministry today sought parliamentary approval for additional spending of Rs 68,294.30 crore that included Rs 14,000 crore "for providing compensation to oil marketing companies towards estimated under-recoveries on account of sale of petroleum products."
Retailers IOC, BPCL and HPCL lost about Rs 20,275 crore on selling petrol, diesel, domestic LPG and kerosene below cost in the first quarter of this fiscal. Of these, losses of upstream firms like Oil and Natural Gas Corp (ONGC), made up for one-third or Rs 6,690.68 crore.
The Finance Ministry will meet the rest by way of cash dole-outs after Parliament passes supplementary demands for grants.
IOC, BPCL and HPCL had reported net losses in April-June quarter as the government support for selling fuel below cost did not come before accounts for the quarter were closed.
In Q1, ONGC paid Rs 5,515.54 crore towards fuel subsidies, Oil India Rs 729.66 crore and GAIL Rs 445.48 crore.
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ONGC, state gas utility GAIL and OIL give discounts to the three retailers on the crude oil and LPG they buy to partly make up for the losses.
For the full fiscal, IOC, BPCL and HPCL are projected to lose less than Rs 57,000 crore.
The government freed petrol prices last month on June 25 and there will be no under-recovery on this motor fuel in the remaining part of the year. The three retailers currently sell diesel at a loss of Rs 2.76 a litre, kerosene at a discount of Rs 15.41 per litre and domestic LPG at a loss of Rs 170.57 per cylinder.
The Union government paid about Rs 26,000 crore in fuel subsidies in the 2009-10 fiscal.