The oil marketing companies increased PDS kerosene price by 25 paise per litre on Thursday, a fortnight after a similar price revision, reports Siddhartha P Saikia in New Delhi.
Official sources told FE that the strategy of monthly price revisions of the fuel, which started on July 1, will now be done every fortnight, at least till the end of the current financial year.
This would mean the prices would go up 50 paise per month rather than 25 paise as planned earlier.
The move would help accelerate the reduction in under-recoveries and hence, the subsidy outgo on the fuel.
At present, PDS (public distribution system) kerosene is sold at a discount of Rs 10.03 a litre. Its price in Kolkata was Rs 16.78 a litre in July, which was revised upwards by 28 paise to R17.04 a litre in August.
The fuel saw two price hikes in the current month, a 26 paise hike to Rs 17.30 a litre on September 1 and another 25 paise upward revision to Rs 17.55 on September 15.
The routine hikes in PDS kerosene prices would bring the price of the fuel closer to market price. However, with the increase in global crude oil prices, the gap between subisdised and market prices has been widening in recent months. Brent crude is up 15.6% to $45.8 per barrel since April 01, 2016. In sync with this, the under-recovery on kerosene has also increased from Rs 8.73 a litre in April 1 to Rs 10.03 a litre now.
The Modi government is pushing to curb siphoning of subsidised fuels and ensure that it reaches the needy. It has run a successful campaign to reduce the diversion of subsidised LPG meant for households, while at the same time giving new connections to the really needy.
The share of kerosene in total the under-recovery of PSU oil marketing companies have risen from 18.26% in 2012-13 to 41.69% in 2015-16. Even though the consumption of kerosene has been coming down over the years, 86.85 lakh kilolitres of subsidised PDS kerosene was allocated to the states in 2015-16, higher than the total household kerosene demand in the country.
Under a formula adopted last financial year, the government is paying a Rs 12 subsidy per litre of kerosene under the PDS, while under-recoveries over and above that was largely borne by oil explorers — ONGC, Oil India and Gail. Out of Rs 11,500-crore kerosene under recovery 2015-16, the Centre’s subsidy share was about Rs 9,200 crore, while upstream oil firms absorbed Rs 1,980 crore. Oil marketing companies bore about Rs 300 crore.
The Budget in FY17 has provided Rs 26,947 crore for fuel subsidy in the current financial year: Rs 19, 803 crore for LPG and Rs 7,144 crore for kerosene. FE reported recently that the government in FY17 will bear the entire fuel subsidy burden, doing away with the practice of shifting part of it to upstream oil companies.