FinMin Pegs LPG Subsidy At Rs 71

New Delhi, December 22: | Updated: Dec 23 2002, 05:30am hrs
The finance ministry is believed to have fixed subsidy on domestic cooking gas (LPG) at Rs 71 per cylinder, much lower than the actual outgo of Rs 195 per cylinder borne by the state-run oil companies.

Oil companies, which have been till October reimbursed Rs 45 per cylinder for selling LPG at subsidised price, will get an additional Rs 900 crore on account of the increase but will still leave a dent of about Rs 2,500 crore on their bottomlines, industry sources said.

State-run oil companies are loosing over Rs 350 crore every month on providing subsidy on LPG and kerosene for PDS, they said, adding the subsidy on kerosene has been put at just over Rs 3 per litre as against the actual outgo of Rs 5.40 per litre.

While the last Budget provided for a fixed subsidy regime pegging the subsidy bill on the two products at Rs 4,495 crore, the current trends in the global markets will total the years outgo on subsidy on LPG and kerosene to around Rs 9,500 crore.

The four oil companies - Indian Oil Corporation, Hindustan Petroleum, Bharat Petroleum and IBP - have lost close to Rs 3,500 crore on account of not being reimbursed the actual cost of subsidy, sources said, adding, this (loss) is likely to reach a staggering Rs 5,000 crore for the year.

To compound the problems, the oil ministry disallowed a 30-40 paise per litre increase in retail selling price of petrol and diesel which has become necessary in view of the surge in global crude oil prices in the first half of December.

Sources said oil companies has in keeping with the fortnightly mechanism of aligning domestic petrol and diesel prices with international crude prices, had proposed a 30-40 paise per litre increase on December 16 but was disallowed by the ministry which felt it will send wrong signals particularly after two successive price cuts in previous month.

The average procurement cost of the Indian basket of crude was $25.44 a barrel in first 15-days of December as opposed to average cost of 23.90 dollars per barrel in the second half of November.

The Indian basket of crude had averaged $23.72 a barrel in the first fortnight of November, sources said, adding the November average procurement price came to $23.60 a barrel.

The continuing subsidy and underselling on petrol and diesel will certainly reflect in the profits of oil companies for the third quarter, sources said.

State-run oil companies have been resorting to short-term market borrowings to tide-over the problem and this fiscal it has done over Rs 1,800 crore of borrowings through commercial papers they said.