Subsidy burden on sale of LPG, diesel and kerosene has declined 20 per cent to Rs 82,844 crore in 2014-15 but the burden sharing mechanism is held up for more than a month because of finance ministry’s refusal to adjust the cess paid on crude oil by national oil companies (NOCs) to the exchequer as their share.
The petroleum ministry last month proposed that the subsidy burden incurred by downstream oil marketing companies (OMCs) on diesel until October 18 and on kerosene and LPG be shared equally between the government and upstream operators ONGC, OIL and GAIL India.
It also proposed that the oil industry development cess of Rs 10,500 crore paid by ONGC and OIL be considered a part of the latter’s burden share. But the finance ministry did not agree to it reiterating its July position that it could not cut the cess because the exchequer had borne a large part of the OMCs’ revenue loss in the past.
“The government has been bearing a substantial portion of the under recoveries of the OMCs and these non-plan expenditures need substantial assistance and in view of these, the cess on crude petroleum cannot be reduced further,” the department of expenditure said. However, last week the petroleum ministry cautioned the department of expenditure that if the cess of Rs 4,500 per tonne amounting to Rs 10,500 crore for 2014-15 was not adjusted, earnings from oil sales by ONGC and OIL would turn negative and jeopardise the finance ministry’s plan to sell 5 per cent in ONGC.
The oil ministry said that cess was to be deployed for the development of oil sector but only Rs 902.40 crore had been provided for this purpose out of the Rs 1,18,506.95 crore collected from 1974-75 to 2012-13. It said that since the cess collected was not being transferred for the intended purpose, there was a need to make the cess collected from ONGC and OIL as a part of the overall burden sharing mechanism.
At the start of the fiscal year, the subsidy burden or the revenue loss on sale of controlled products below market price was estimated at Rs 1,04,500 crore. Sources said the falling crude price has brought down kerosene subsidy to Rs 26,520 crore from last month’s Rs 28,382 crore while that on diesel stood fixed at Rs 10,821 crore as on October 18 when its price was decontrolled. This would be shared equally between the Centre and the NOCs.