FinMin okays Rs 45,000cr for Jan-Mar oil subsidy

Finance ministry today approved Rs 45,000 crore as the subsidy compensation for oil marketing companies (OMC) for the January-March quarter, oil secretary Vivek Rae today said. CNBC-TV18's Nayantara Rai reports.

The total FY13 revenue loss compensation by Government of India is now pegged at Rs 1.1 lakh crore. The finance ministry is likely to issue letter to oil companies on FY13 subsidy payment today.

Rae added that upstream companies like Oil India, GAIL and ONGC will share a subsidy burden to the tune of Rs 60,000 crore for FY13.

However Finance Minister P Chidambaram refused to give any cash assistance to the oil marketing companies unless export parity pricing is rolled out. In a meeting concluded earlier today petroleum minister, Veerappa Moily in-principal agreed to adopt export parity price for petroleum products.

For last several months oil ministry and finance ministry were at loggerheads over implementation of export parity pricing. While finance ministry wanted to cut down oil subsidy bill by switching over to EPP, oil ministry opposed the move on grounds that the OMCs would lose too much money and that their balance-sheets would be severely weakened.

Oil and gas expert Kirit Parikh has been asked by the government to look in to the pros and cons of export parity pricing (EPP) versus trade parity pricing (TPP) and he has to submit this report in three months time. So, for at least three months, EPP is not expected to be rolled out.

The oil marketing companies were to take a hit of almost Rs 18000 crore in FY13 if EPP was implemented. However with EPP not being rolled out now, Moily looked relatively relieved after the meeting with the finance minister and PMO.

“We have already constituted Kirit Parikh committee and whatever the terms of reference are to be changed we have agreed to change as per the suggestion which may be given by the finance ministry. We have no issues on that. Within a month or two we would like to have this," Moily said.