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Finance Minister P Chidambaram has agreed to subsidise only half the losses of state-owned oil refining companies for selling petroleum products below market prices in 2013-14.
As a result, ONGC, Oil India and GAIL India, upstream energy companies meant to share the under-recoveries, might have to bear Rs 64,569 crore, or 46 per cent, of the Rs 1,39,800-crore loss. This is nine percentage points more than the Rs 60,000 crore they absorbed in 2012-13.
Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation, the government-owned refiners, might also see their share of the loss zoom four times, to Rs 4,500 crore.
These companies are selling every litre of diesel for Rs 6.80 less than its market price in the first fortnight of May but the Election Commission is yet to respond to a request by the petroleum ministry for a price increase. Last month, the ministry had told state-owned oil refiners not to raise diesel prices by a scheduled 50 paise a litre because losses had fallen to less than Rs 6 a litre.
The refiners have also not raised the price of petrol after lowering it by Rs 1.45 a litre in two fortnightly revisions last month.
The finance ministry had picked up a tab of Rs 1,00,000 crore when India’s losses for selling fuel cheap touched a record Rs 1,61,000 crore in 2012-13. This has come down to Rs 70,700 crore in 2013-14, with Chidambaram rolling over Rs 35,000 crore to next year. “Upstream (oil & gas companies) are expected to provide an additional Rs 16,000 crore to the subsidy share,” said a petroleum ministry official close to the development who did not wish to be named.
Lower-than-expected tax collections and higher Plan expenditure forced the finance ministry to tighten non-Plan expenditure. At the end of February 2014, the fiscal deficit, the government’s spending beyond its receipts, was 14.3 per cent higher than the Rs 5,24,539 crore estimated in the interim Budget.
“Average international crude oil prices dropped from $110-112 a barrel to $105 last financial year. The monthly 50 paise increase in diesel prices was also a factor in reducing the overall subsidy,” said an executive with an oil marketing company.
The share of diesel in the fuel subsidy fell 31.7 per cent to Rs 62,837 crore in 2013-14 from Rs 92,061 crore in 2012-13. The share of cooking gas rose 17. 4 per cent to Rs 46,458 and kerosene's share rose 3.9 per cent to Rs 30,575 crore.
State-owned oil refiners are now losing about Rs 342 crore a day on the sales of cheap diesel, kerosene and cooking gas. This is higher than the Rs 337 crore they lost daily in the previous fortnight. The loss on kerosene has come down to Rs 33.85 a litre and on cooking gas to Rs 449.13 a cylinder.
