In a decision that will clear air about fuel subsidy sharing, the government today said upstream firms like Oil and Natural Gas Corp's ( ONGC) contribution to subsidising diesel and cooking fuels will be capped at $56 per barrel.
ONGC, Oil India and GAIL (India)are to share a part of the revenues that retailers lose on selling diesel, cooking gas (LPG) and kerosene at government controlled rates. Their share to begin with was 33 percent of the revenue loss on fuel sales but has slowly risen to 40 percent.
"Their contribution will be capped at $56 per barrel," Oil Minister S Jaipal Reddy said at the Economic Editors Conference. This means that suppose ONGC realises $100 per barrel from sale of crude oil it produces, it will be allowed to retain only $ 44 and the rest $56 would be taken away for subsidising fuel.
Upstream firms had in 2011-12 made good 40 percent of the Rs 138,541 crore revenue that Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp lost on fuel sales. Their Rs 55,000 crore contribution that year compared to Rs 30,297 crore in 2010-11 and Rs 14,430 crore in 2009-10.
The remaining revenue loss was made good by the Finance Ministry by way of cash subsidy. In 2011-12, government gave out Rs 83,500 crore by way of cash subsidy, up from Rs 41,000 crore in 2010-11 and Rs 26,000 crore in 2009-10.
In the first quarter of current year, upstream firms made good Rs 15,061 crore out of the Rs 47,811 crore retailers lose on sale of diesel, cooking gas and kerosene. The Finance Ministry has not given any subsidy this fiscal so far. Oil Secretary G C Chaturvedi said for the second quarter, when retailers lost Rs 42,200 crore in revenue, their contribution would be in the range of Rs 14,000-15,000 crore.
Asked if the USD 56 per barrel limit was not too high for ONGC in case oil falls below $ 100 per barrel, he said the Oil Ministry will approach the Finance Ministry for suitably lowering the cap. He said the Oil Ministry had sought cash subsidy of Rs 32,750 crore for the first quarter but the Finance Ministry has not released any.
In the absence of the subsidy support, IOC reported the highest-ever quarterly net loss by any Indian company at Rs 22,451 crore for April-June. HPCL posted Rs 9,249 crore net loss in April-June while BPCL reported a net loss of Rs 8,836 crore for the first quarter.
Reddy said for the current fiscal, under-recoveries or revenue loss on fuel sale is estimated at a record Rs 167,415 crore. Upstream firms are expected to make good Rs 55,000 crore to Rs 60,000 crore and the rest would have to come from the government.