The petroleum ministry is reworking the fuel subsidy-sharing formula and will proceed on its stake sale in the Oil and Natural Gas Corp (ONGC) after finalising a new one to ensure a better sale price, Petroleum Minister Dharmendra Pradhan said Thursday.
"The government is looking at new subsidy-sharing formula. As far as ONGC is concerned, they have some issues regarding subsidy-sharing formula. Let's have re-look on the issue. I am sure ONGC will get better price," Pradhan told reporters here after meeting Finance Minister Arun Jaitley.
The cabinet has approved a 5 percent stake sale in ONGC, which could fetch the exchequer an estimated Rs.11,500 crore. The government has 68.94 percent stake in ONGC.
A petroleum ministry source told IANS last month that it is reworking ONGC's fuel subsidy-sharing formula through adjustment of the statutory oil cess against its share to lower the discount burden and boost the explorer's profits.
According to the new formula, the outgo of upstream oil producers like ONGC is to be reduced to the extent of Rs.4,500 per tonne on oil development cess they pay to the government.
The government deregulated diesel in October, but state-run companies continue to sell it at a discount to oil marketers for them to retail kerosene and cooking gas below cost. Upstream producers like ONGC meet almost half of the revenue loss or under-recoveries that fuel retailers incurred on selling fuel below cost.
The source said the subsidy amount for upstream companies has increased from Rs.32,000 crore in 2008-09 to Rs.67,021 crore in 2013-14.
In 2013-14, ONGC paid a record Rs.56,384 crore subsidy, which this fiscal is likely to come down to around Rs.32,000 crore.
The Comptroller and Auditor General of India (CAG) had, in a report last year, said the uncertainty in the mechanism of funding under-recoveries would place public sector upstream companies at a relatively disadvantageous position.
