The government has closed its oil subsidy account for fiscal year 2011 by giving state-owned oil marketing companies an additional subsidy of Rs 20,000 crore. This brings the total subsidy paid to OMCs (compensating them for selling fuel below cost during the year) to Rs 40,120 crore. It had in two previous installments given Rs 20,911 crore.
Disappointed with the government's move, Oil and Natural Gas Corporation's former chairman and managing director RS Sharma said the dilly-dallying in subsidy roll-out is uncalled for. "This is not the correct way of governance. The government has to treat the issue with more seriousness. The ad hoc nature of subsidies needs to be done away with. The government will fail to earn investor respect with such policy making," he told CNBC-TV18. The cash subsidy payout is less than half of the over Rs 78,000 crore that the OMCs lost on selling auto and cooking fuel below their imported cost in 2010-11 fiscal. The finance ministry has given Rs 11,027 crore in cash compensation to Indian Oil Corp (IOC), Rs 4,595 crore to Bharat Petroleum (BPCL) and Rs 4,379 crore to Hindustan Petroleum (HPCL). (Click here to know how the stocks reacted on the back of this news) Going forward, Sharma said he expects highest-ever under-recoveries in FY12, despite softening crude prices. Don't miss the accompanying video to learn how CNBC-TV18's Gautam Broker is analysing the issue.Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
