E-Paper
Cabinet clears ₹22k-cr boost for three oil PSUs
Announcing the decision after the Cabinet meeting, Union information and broadcasting minister Anurag Thakur said the one-time grant to the three oil marketing companies (OMCs) is to offset their losses on selling liquefied petroleum gas (LPG) between June 2020 and June 2022.
The Cabinet on Wednesday approved a one-time grant of ₹22,000 crore to state-run oil marketing companies that lost money selling cooking gas below cost, a move aimed at helping the three firms – they incurred a combined net loss of ₹18,500 crore in the first quarter of 2022-23 – improving the health of their profit and loss statements. They are expected to post a higher loss in the second quarter.
Announcing the decision after the Cabinet meeting, Union information and broadcasting minister Anurag Thakur said the one-time grant to the three oil marketing companies (OMCs) is to offset their losses on selling liquefied petroleum gas (LPG) between June 2020 and June 2022. The three OMCs are – Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).
Even as LPG rates jumped over 300% in many countries, public sector oil marketing companies kept the rates of cooking gas low to shield the Indian consumer, he said. “Although the government is giving a one-time grant to PSU [public sector undertaking] oil companies, indirectly, it is for the consumer, as these firms are being compensated for incurring revenue losses in keeping fuel prices low. The government protected the consumers despite India being a major importer (of energy),” Thakur said. India imports 85% of its crude oil it processes and 55% of the natural gas it consumes.
This one-time grant is over and above the ₹4,000 crore Direct Benefit Transfer of LPG subsidy in 2022-23 provided in the Budget, an official aware of the development said, requesting anonymity. The budgetary allocation of LPG is, however, shrinking.
The actual direct benefit transfer of LPG subsidy, which was ₹29,628 crore in 2019-20, first reduced to ₹23,667 crore (actuals) in 2020-21. Thereafter, it was trimmed drastically to ₹3,400 crore in the revised estimates (RE) of 2021-22 from the budget estimates (BE) of ₹12,480 crore. The BE for 2022-23 has now been kept at ₹4,000 crore. There is no official data available on specific details of LPG subsidy through DBT mode – number of the beneficiaries, location of such beneficiaries and amount of unit subsidy paid to them.
A company executive and the official mentioned above said the ₹22,000 crore grant was given to OMCs to keep them in good financial health after they incurred huge revenue losses mainly because of keeping petrol and diesel rates frozen since April 7. “The grant will provide fresh lease of life to them as their good health is necessary for country’s energy security,” the official said. While petrol and diesel are deregulated fuels, the government tacitly controls their rates for political and economic reasons, the executive added.
Highlighting the Narendra Modi government’s resolve to protect the consumer interests, Thakur said the Centre twice reduced excise duty on deregulated petrol and diesel to provide relief to the poor. The Centre slashed excise duties on petrol and diesel in November 2021 ( ₹5 per litre on petrol and ₹10 a litre on diesel) and May 2022 ( ₹8 a litre on petrol and ₹6 on diesel). While many states followed the Centre by reducing the VAT (value-added tax) on fuels, some states did not sacrifice their revenues.
Petrol and diesel pricing was deregulated in June 2010 and October 2014, respectively, but the government tacitly controls pricing of the two politically sensitive auto fuels. The three state-run OMCs enjoy monopoly in domestic fuel retailing with about a 90% market share. Their combined net loss in the April-June quarter (Q1 FY23) was ₹18,500 crore against a ₹9,238 crore net profit in Q1 of 2021-22. They are expected to post a higher loss of around ₹20,000 crore in the second quarter of the year according to analysts.
