OilMin to seek over Rs 1 lakh crore towards fuel subsidy

The Oil Ministry will seek over Rs 1,00,000 crore from the Finance Ministry this fiscal towards fuel subsidy, new Petroleum Minister M Veerappa Moily said today.

State-owned fuel retailers are likely to end the fiscal with a revenue loss of over Rs 1,63,000 crore on sale of diesel, domestic cooking gas (LPG) and kerosene at government-controlled rates that are way lower than cost, he said soon after taking over as the new oil minister.

"Of this, about Rs 60,000 crore will come from upstream companies Oil and Natural Gas Corp (ONGC), Oil India Ltd and GAIL India. We will ask the Finance Ministry to compensate the rest by way of cash subsidy," he said.

Oil PSUs, he said, cannot sustain high level of under-recoveries or revenue losses and ways have to be found to drastically bring down these.

"How long can you run these companies on loss. How long can you go with these kind of under-recoveries. It is criminal. We need to prepare roadmap to see under-recoveries drastically comes down," he said. "I am not saying subsidy should be cut but inefficiencies have to be removed from the sector."
    
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.

Their contribution now has been capped at USD 56 per barrel. This means that suppose ONGC realises USD 100 per barrel from sale of crude oil it produces, it will be allowed to retain only USD 44 and the rest USD 56 would be taken away for subsidising fuel. Upstream firms had in 2011-12 made good 40 per cent of the Rs 138,541 crore revenue that Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp lost on fuel sales. Their Rs 55,000 crore contribution that year compared to Rs 30,297 crore in 2010-11 and Rs 14,430 crore in 2009-10.

The remaining revenue loss was made good by the Finance Ministry by way of cash subsidy. In 2011-12, government gave out Rs 83,500 crore by way of cash subsidy, up from Rs 41,000 crore in 2010-11 and Rs 26,000 crore in 2009-10. 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, Moily said.

"We plan to shortly make the short trip to the Finance Ministry to request for release of subsidy," he said. The Oil Ministry had sought cash subsidy of Rs 32,750 crore for the first quarter but the Finance Ministry has not released any.

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.

In the absence of the subsidy support, IOC reported the highest-ever quarterly net loss by any Indian company at Rs 22,451 crore for April-June. HPCL posted Rs 9,249 crore net loss in April-June while BPCL reported a net loss of Rs 8,836 crore for the first quarter.