1. Govt sanctions Rs 5,085 cr in oil subsidy for December quarter

Govt sanctions Rs 5,085 cr in oil subsidy for December quarter

The government today sanctioned Rs 5,085 crore in oil subsidy for the December quarter...

By: | New Dehli | Updated: February 13, 2015 10:20 AM
Oil Prices, ONGC, Oil Subsidy, Oil ministry, ONGGc oil, ONGC news, Oil Subsidy Government

Upstream oil producers like ONGC, who traditionally made good up to half of the revenue losses, were expected to pick up the remaining Rs 10,896 crore, but a last minute intervention by the Oil Ministry helped prevent their first quarterly loss in many years. (PTI)

The government today sanctioned Rs 5,085 crore in oil subsidy for the December quarter, less than one-third of the revenue lost on LPG and kerosene sales.

A total of Rs 15,981 crore in revenue was lost by fuel retailers on selling PDS kerosene and domestic LPG at government-controlled rates in October-December. Of this, the Finance Ministry issued letter providing for less than one-third of this as cash subsidy, official sources said.

Upstream oil producers like ONGC, who traditionally made good up to half of the revenue losses, were expected to pick up the remaining Rs 10,896 crore, but a last minute intervention by the Oil Ministry helped prevent their first quarterly loss in many years.

With international oil prices halving to USD 50 per barrel, providing the subsidy discounts would have meant they got rates way below their cost of production.

In view of this, making good the remaining Rs 10,896 crore was left to be decided in future.

This would mean that upstream firms will not pay any subsidy in October-December and final adjustments will be done in the fourth quarter, they said, adding in the third quarter the retailers will have to bear these losses on their books.

In the first half of current fiscal, fuel retailers IOC, BPCL and HPCL had together lost Rs 51,110 crore in revenue on selling fuel below cost. Most of this was made good by way of Rs 31,926 crore dole from upstream players and Rs 17,000 crore coming from Budget as cash subsidy.

The Oil Ministry, they said, had sought Rs 22,101 crore in subsidy to cover for losses on LPG and kerosene sale in the second half of current fiscal so as to almost exempt ONGC and OIL from any payments.

Sources said the gross realisation of ONGC during the October-December quarter was USD 75-76 per barrel and after accounting for subsidy payout, which are in form of discounts it will give on crude oil sold to IOC, BPCL and HPCL, the net realisation was likely at USD 35-36.

ONGC’s cost of production is around USD 40 per barrel.

Under-recoveries, or revenue retailers’ loss on selling fuel below cost, is projected at Rs 74,773 crore in full 2014-15 fiscal.

Out of this, Rs 51,109.53 crore was in first half, which was met by Rs 17,000 crore in government subsidy and ONGC paying Rs 26,841 crore. OIL paid Rs 4,085 crore and gas utility GAIL paid Rs 1,000 crore.

The Ministry has put the under-recoveries in October-December quarter at Rs 15,981.28 crore and Rs 7,682 crore in the fourth quarter.

Sources said the Ministry had projected that government will earn Rs 75,944 crore from excise duty on petrol and diesel this fiscal and even after paying for Rs 39,101 crore subsidy (Rs 17,000 crore of first half and Rs 22,101 crore in second half), it will be left with Rs 36,843 crore.

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  1. Nitin N Varia
    Feb 14, 2015 at 11:05 am
    DISINVESTMENT IN ONGC AND IOC BEING STAGNATED due to insider trading. If the subsidy formula is transparent then FII would be more than happy to invest. Since subsidy and excise are arbitrary decision known to coterie near to seat of power making decision is then ped on to the insider traders who play and hence investor not willing to invest at low price of these scripts. If subsidy and excise mechanism transparent FII WILLING TO INVEST in ONGC in price of 400 and for IOC TOO it can fetch price of 700 . Is it logical that when crude have dropped 100% in last six months the 95% cost of IOC PETROLEUM PRODUCTS yet IOC IS WAY BELOW ITS INTRINSIC value. If BJP and its Minister claim to be Nationalist why they want to throw away National ets at throw away price. Is it to garner crony capitalism the sophisticated art of corruption and yet placate Nationalistic. THEVNEED OF THE HOUR IS YRANSPARENT SUBSIDY MECHM PLUS CLARITY ON EXCISE IT CANT BE INTERMITENT AND AS RESULT HALT OF INSIDER TRADING.
    Reply
    1. Nitin N Varia
      Feb 14, 2015 at 10:14 am
      Government making a windfall of 36000 crore from abrupt excise levy on act of falling crude prices was DAY LIGHT ROBBERY for Delhi Election as BRIBE. The people did not accept this bribe or robbery and ing replybgiven. The OMC serving the nation 24 hours 365 days are left to slog for the sake of remaking in power BJP PLAYING THE SAME TRICK OG CONGRESS OF APPEAT TO VOTERS.ONLY THING AS CHANGED FROM SILENT PM TO jingoistic PM but action to milk thevOMC still prevail. With this heavy insider trading prevalent in PSU by code being changed in open interest after close of market. No one to question the crony capitalism of insider traders in near proximity to seat power. Why gov not making transparency just to thrive on crony capitalism a sophisticated art of corruption. Nitin Varia
      Reply

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