of compensation, the company would rather accept a rollback of the deregulation.
Under-recoveries in the current fiscal are estimated to be Rs 1.67 lakh crore. For domestic LPG and kerosene, under-recoveries stand at Rs 490.50/cylinder and Rs 30.64/litre respectively. OMCs are currently incurring daily under-recoveries of about Rs 384 crore on the sale of diesel, kerosene and domestic LPG. Cutting these subsidies (compensation for these losses) is crucial for the Centre’s fiscal consolidation road map and avoiding a downgrade of India’s sovereign credit rating to junk status.
The CCPA raised the annual ceiling on subsidised LPG cylinders to 9 (from previous 6) effective next fiscal and raised the entitlement for this year to 8. Subsidised LPG costs Rs 410.50 per 14.2-kg cylinder and any household requirement beyond the new limit of 9 cylinders will cost a near market price of Rs 895.50 per bottle. Finance minister P Chidambaram said oil companies have been allowed to make “small correction... I am looking at the same subsidy bill as was expected earlier.”
“Given the experience faced by OMCs on account of petrol and on LPG, we have a difficult situation in hand. We have not seen the notification. If the government has decontrolled diesel, there will be no question of subsidy either,” said Deloitte senior director oil and gas Kalpana Jain. The price of diesel was last revised on September 14 when it was hiked by a steep Rs 5.63 per litre. At present, diesel costs Rs 47.15 per litre in Delhi.
Even petroleum secretary GC Chaturvedi was not willing to term the decision deregulation. He said: “If we are to deregulate, then diesel price will have to be raised by Rs 9.60 per litre, which is not the case.”
Essar Oil MD and CEO LK Gupta said: “Private oil marketing companies have invested substantially in setting up retail outlets, but due to lack of level playing fields, these assets were underutilised. Once price parity is reached between retail and market prices, it will not only