FinMin to verify OMCs' losses

Written by Agencies | New Delhi | Updated: Nov 4 2012, 20:05pm hrs
The Finance Ministry in a study will verify the claims of losses by state-owned oil companies on selling diesel, LPG and kerosene below cost price and decide the quantum of subsidy for 2012-13 based on the report.

"The Finance Ministry in consultation with the Oil Ministry is conducting a study on the under-recoveries of the OMCs. The report is likely by November 15," sadi a senior government official.

The government compensates three OMCs -- Indian Oil, Hindustan Petroleum and Bharat Petroleum -- for selling diesel, cooking gas (LPG) and kerosene for under-recoveries, which is the difference between the cost price and selling price.

"We will decide on the quantum of subsidy to OMCs based on this study," the official added.

Last week, Petroleum Minister Veerappa Moily had said that his ministry will seek over Rs 1,00,000 crore from the Finance Ministry this fiscal towards fuel subsidy.

The Finance Ministry has already paid Rs 43,580 crore, earmarked in the budget for 2012-13, to oil companies as fuel subsidy to set off dues for the previous fiscal.

State-owned fuel retailers are likely to end the fiscal with a revenue loss of over Rs 1,63,000 crore. Of this, about Rs 60,000 crore will come from upstream companies Oil and Natural Gas Corp (ONGC), Oil India Ltd and GAIL India.

State retailers currently lose Rs 9.82 per litre on diesel, Rs 33.93 a litre on kerosene and Rs 468.50 per 14.2-kg subsidised LPG cylinder. They currently are losing Rs 433 crore per day.

Upstream firms ONGC, OIL and GAIL share a part of the revenues that retailers lose on selling diesel, LPG and kerosene at government-controlled rates. Their share to begin with was 33 per cent of the revenue loss on fuel sales but has slowly risen to 40 per cent.

In the first quarter of current year, upstream firms made good Rs 15,061 crore out of the Rs 47,811 crore retailers lose on sale of diesel, cooking gas and kerosene. The Finance Ministry has not given any subsidy this fiscal so far.

In the second quarter, the fuel retailers lost Rs 42,200 crore in revenue. Of this, upstream contribution would be in the range of Rs 14,000-15,000 crore and rest would have to come from the Finance Ministry.