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Finance Ministry today agreed to give Rs 8,000 crore cash subsidy to fuel retailers IOC, BPCL and HPCL to make up for less than a third of losses they incur on selling diesel and cooking fuel below cost.
Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) lost Rs 25,579 crore on selling diesel, domestic LPG and kerosene below cost in the April-June quarter.
Of this, the finance ministry issued a letter sanctioning Rs 8,000 crore, officials said.
The subsidy support sanctioned is way short of Rs 11,451 crore that the Oil Ministry has sought for the first quarter of the fiscal.
Upstream oil firms like Oil and Natural Gas Corp (ONGC), Oil India Ltd (OIL) and GAIL India Ltd will bear Rs 15,303.84 crore and the rest would be borne by fuel retailers.
Officials said IOC will get cash subsidy of Rs 4,261.29 crore, BPCL Rs 1,916.57 crore and HPCL Rs 1,822.14 crore for the April-June quarter.
Government bears a third of the revenue losses or under recoveries that retailers incur on selling fuel at government controlled rates. Upstream firms chip in a substantial portion by way of discount on crude oil and LPG they sell to retailers.
Depreciating rupee has resulted in widening losses on fuel sales and oil firms are currently losing Rs 9.29 per litre on diesel, Rs 33.54 a litre on kerosene and Rs 412 per 14.2-kg LPG cylinder.
ONGC, they said, will chip in Rs 12,621.78 crore, OIL Rs 1,982.06 crore and GAIL Rs 700 crore to make up for bulk of fuel losses in the April-June period.
From upstream share, IOC would get Rs 8,151.77 crore, BPCL Rs 3,666.36 crore and HPCL Rs 3,485.71 crore.
Without the cash subsidy, fuel retailers were set to report losses in Q1. HPCL announce first quarter numbers on August 12 while IOC and BPCL are schedule to declare results the next day.
