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Govt picks only half of home fuel subsidies tab

business Updated: Jan 14, 2010 20:46 IST
HT Correspondent
HT Correspondent
Hindustan Times
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After bleeding on domestic fuel – kerosene and LPG – sales, the state-owned oil marketing companies (OMCs) now find themselves shortchanged on the quantum of anticipated relief.

The finance ministry has agreed to reimburse Rs 12,000 crore in cash subsidy to the OMCs to make up for their revenue losses on sales of cooking gas (LPG) and kerosene for the first three quarters (April-December 2009) of the current financial year. However, the compensation package is 43 per cent short of the petroleum ministry’s demand – Rs 20,872 crore.

While Petroleum Minister Murli Deora said, “a decision may take some more time,” a senior finance ministry official said a letter detailing the Rs 12,000 crore subsidy payout will be released on Friday morning.

The cash payout is a departure from the government’s earlier policy of issuing oil bonds and it may be a one-time measure, as there have been undue delays on the part of the finance ministry to issue oil bonds to OMCs for the April-December period.

Asked about the low subsidy payout, petroleum ministry officials said the finance ministry feels the current year is not an ‘exceptional’ period, as global oil rates have been at a moderate level. Therefore, the 2006-07 formula of picking up one-third of the revenue loss on fuel sales should apply.

On its part, the petroleum ministry wanted the finance ministry to honour the July 2009 commitment of making up for the entire revenue loss on domestic LPG and kerosene.

The losses on sales of petrol and diesel in the domestic market were to be made good by upstream firms like ONGC, OIL and GAIL.

Deora had last month raised the issue with Prime Minister Manmohan Singh and the same again figured during his meeting with Singh on the oil sector on Wenesday evening.

IOC, BPCL and HPCL lost Rs 11,853 crore in revenues as they were not allowed to raise LPG and kerosene prices in line with raw material (crude oil) prices during April-September. An additional Rs 9,019-crore revenue loss was incurred in the third quarter.

The three firms currently lose Rs 3.06 a litre on petrol, Rs 1.56 per litre on diesel, Rs 17.23 a litre on kerosene and Rs 299.01 per LPG cylinder.