OMC shares rise as Finance Ministry mulls Rs 32,000-35,000 crore fund to compensate for LPG under-recovery

Shares of oil marketing companies are marginally higher on a subdued day of trade on July 10, on hopes of that the Finance Ministry may soon approve setting up of a fund to specifically address the under-recovery on account of losses incurred on LPG subsidies, following which the proposal would then be sent to the Cabinet for approval.

Moneycontrol reported citing sources that the under-recovery will be funded through the proceeds of excise duty hikes, and will be channelled via the Consolidated Fund of India. The Finance Ministry is finalizing the contours of the deal, and a Cabinet approval for the compensation could be sought soon, it is learnt.

Sources also told Moneycontrol that the Finance Ministry has agreed to this proposed fund that be to the tune of Rs 32,000-35,000 crore, though this is lower than the Petroleum Ministry's initial demand of Rs 40,000 crore.

In April this year, domestic LPG prices were raised by Rs 50 per cylinder, which resulted in a decrease in under-recoveries. OMCs have been hopeful in recent quarters about some mechanism to address the rising LPG recoveries.