The Finance Ministry will pay state-owned fuel retailers Rs 1,300 crore cash subsidy for kerosene for the first quarter ended June 30, but the same on LPG will be decided later.
The Ministry has sanctioned a total of Rs 1,300.42 crore kerosene subsidy for April-June, a senior official said.
Of this, Rs 878.84 crore will be paid to Indian Oil Corporation (IOC), Rs 203.33 crore to Bharat Petroleum Corporation (BPCL) and Rs 218.25 crore to Hindustan Petroleum Corporation (HPCL).
The subsidy payout is as per a new formula approved by the government wherein the dole on kerosene has been capped at Rs 12 per litre.
Kerosene through public distribution system (PDS) is sold at Rs 14.96 per litre against the actual cost of Rs 33.47. The difference between the two, Rs 14.95 per litre, is termed as under-recovery or revenue loss.
“The Finance Ministry will pay Rs 12 per litre in cash to state-owned fuel retailers from the Budget and any unbridged gap between the retail selling price and the cost of production will be borne by upstream companies like ONGC,” he said.
At current prices, the upstream companies will have to bear Rs 5,000-6,000 crore for the full year.
For domestic cooking gas LPG, the government has decided to fully bear the under-recovery, he said, adding that the subsidy on this fuel will be announced later.
As many as 12 LPG cylinders of 14.2-kg are supplied to every household at a subsidised rate of Rs 417.82. There is an under-recovery of Rs 167.18 per cylinder, which the government will bear entirely.
The official said the Budget for 2015-16 has provided for Rs 22,000 crore towards LPG subsidy and another Rs 8,000 crore on kerosene.
“While provisioning for kerosene is sufficient, additional funds may have to be provided in supplementary demands for LPG,” he added.