gas distribution players.
The deregulation of bulk diesel prices would bring in private retailers like Reliance and Essar into this segment of the market, posing competition for state-run retailers.
“The lower under-recoveries of PSU OMCs (IOC, HPCL and Bharat Petroleum) would significantly decrease the subsidy burden of GoI and PSU upstream companies on a full-year basis, if this is implemented on a consistent basis. However, there is lack of clarity on the quantum and timelines of revision of diesel prices given the politically sensitive nature of the issue,” Icra wrote in a report.
It is likely that the government would let upstream oil companies ONGC, Oil India and GAIL cut their share of the subsidy burden corresponding to, if not more than, the overall decrease in the oil subsidy burden. The hike in the number of subsidised LPG cylinders from six to nine per household per year would, however, increase the under-recoveries by Rs 9,300 crore annually.