Govt may roll over Rs 40,000 crore oil subsidies to 2014-15
On the back of high fiscal deficit worries and to avert any possibility of a sovereign rating downgrade, the finance ministry is contemplating rollover of a major part of its fuel subsidy burden for the current financial year to the next fiscal.business Updated: Nov 14, 2013 01:54 IST
On the back of high fiscal deficit worries and to avert any possibility of a sovereign rating downgrade, the finance ministry is contemplating rollover of a major part of its fuel subsidy burden for the current financial year to the next fiscal.
The actual fuel subsidy burden in 2013-14 is likely to be Rs 1,40,000 crore, more than double the Rs 65,000 crore target, as per petroleum ministry estimates. Subsidies have a direct impact on the fiscal deficit, which is posing a threat of a sovereign rating downgrade.
Officials said the finance ministry is likely to shift as much as Rs 40,000 crore of the subsidy bill to 2014-15. Subsidy payments from 2012-13 were also deferred into the current financial year.
Other measures to reduce the subsidy burden include attempts to cut expenditure, and also by shifting the burden of these subsidies on the balance sheets of cash-rich companies such as ONGC and OIL — even though this may affect ONGC’s plans to produce oil and gas.
“Expenditure cuts could help the finance ministry meet around Rs 25,000 crore of its fuel subsidy worries,” a top official said.
Rising global oil prices coupled with the steep 22% depreciation in the value of the rupee against the dollar, and the inability of the government to increase fuel prices in line with requirements, have all contributed to the ballooning burden.
In view of the coming general elections, the government has been wary of hiking fuel prices. ONGC and OIL have both told the government the burden of oil subsidies would affect domestic oil production, which would send up crude oil imports, further hurting the CAD.
Indian Oil Corp has reported an 82.5% fall in net profit in the September quarter from a year ago.
The government had earlier cancelled overseas road shows for the IOC share sale, fearing a tepid response from investors.
Reuters has said that the government now plans to revive the road shows for IOC’s FPO for overseas investors in New York, Boston and London starting next week. But officials are worried the government’s reluctance to fully fund IOC’s losses and its precarious finances will result in low investor interest.