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Oil Ministry seeks INR 26,000 crore as fuel subsidy for Q3

The Petroleum Ministry has asked for INR 26,000 crore as fuel subsidy for the third quarter of this financial year, but the finance ministry is inclined to provide only INR 10,000 crore cash support.
"We have written to the finance ministry seeking INR 26,000 crore subsidy support for covering under-recoveries (revenue loss) on diesel and cooking fuel in Q3 as well as unmet losses of the previous fiscal," Oil Secretary Vivek Rae said.
Fuel retailers lost INR 39,725 crore on selling diesel, kerosene and domestic cooking gas (LPG) at government controlled rates in October-December 2013. Upstream companies Oil & Natural Gas Corp and Oil India Ltd will make good INR 15,937.59 crore, or about 40 per cent, of this amount.

For the rest, the oil ministry wants cash subsidy, he said. "There is also some unmet under-recoveries of the previous two quarters, which we have sought from the finance ministry." Without the government subsidy, state-owned fuel retailers Indian Oil Corp (IOC), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) will report losses in the third quarter. HPCL is scheduled to report its earnings tomorrow while BPCL results are due on February 12, followed by IOC on February 13. Sources, however, said the finance ministry is willing to give only INR 10,000 crore of subsidy support for now and wants the rest to be carried forward to the next financial year. The government provided INR 17,772 crore of cash subsidy in the first half of the current financial year.

Fuel retailers sell diesel and cooking fuel at rates below the cost of production. The losses they incur are met by way of cash subsidy and support from upstream firms. For Q3, ONGC's share of the burden will be INR 13,764.11 crore, while OIL will bear INR 2,173.48 crore. Gas utility GAIL India did not pay any subsidy in Q3.

ONGC's liability is near the record INR 13,796.04 crore it shelled out in Q2. Sources said IOC's share of the support provided by the two exploration companies would be INR 8,261.30 crore. BPCL would get INR 3,971.31 crore and HPCL INR 3,704.98 crore. During April-September, IOC, BPCL and HPCL together lost INR 60,907 crore in revenue on selling diesel and cooking fuel. Of this, ONGC made good INR 26,417.82 crore, OIL INR 4,215.76 crore and GAIL INR 1,400 crore. Sources said ONGC's subsidy burden in Q3 would be about 10 per cent higher than the INR 12,433 crore paid in the same period of the previous financial year.

Source-On Request