Are the huge losses being projected by state-owned oil marketing companies (OMCs) - Indian Oil, Hindustan Petroleum and Bharat Petroleum - for selling petrol, diesel, cooking gas (LPG) and kerosene below the cost price, for real?
Suspecting Indian Oil, HPCL and BPCL of exaggerating their under-recoveries (or losses on selling fuels below cost price), the finance ministry has decided to re-validate the figures before releasing subsidy support.
The finance ministry compensates OMCs for under-recoveries.
The OMCs have projected under-recoveries on sale of diesel, cooking gas and kerosene at Rs. 1.9 lakh crore for 2012-13, more than India's defence budget for the current fiscal year or four times that of the NREGA budget.
"Before releasing funds, we will revalidate the under-recovery figures submitted by the OMCs for the first quarter of the current fiscal year," a senior finance ministry official told HT."There are doubts on the methodology that is adopted by the oil companies to calculate under-recoveries on subsidised fuels and it is felt that these under-recoveries are inflated."
A senior official on IOC's management confirmed that the finance ministry "wants to revalidate the under-recovery figures of OMCs." However, he clarified that oil firms have not got anything in writing yet, either from the parent or finance ministry.
The finance ministry first released Rs. 68,500 crore in cash subsidies during 2011-12 and another Rs. 38,500 crore in May to compensate OMCs.
Upstream oil firms including ONGC, OIL and GAIL released another Rs. 52,500 crore as subsidy support.
Market experts said a large subsidy dole out by the government and sister oil PSUs has been helping the three OMCs announce profits every year.
"It is a case of financial jugglery that is keeping OMCs alive," said independent analyst SP Tulsian.