New Delhi, June 27: GAIL (India) Limited does not benefit from a crude price hike and, therefore, should be exempted from subsidising the losses of PSU oil retailers on account of such a hike, the company said today.
GAIL, along with ONGC and Oil India Ltd, partially meets the losses of the retailers, but unlike the other two PSUs, which are crude oil producers, the company is in the gas transportation and marketing businesses.
We have been saying that GAIL should be out of the subsidy sharing mechanism as unlike oil and gas producers we do not get any incremental revenue on the increase in oil and gas prices, GAIL chairman and managing director B.C. Tripathi told reporters.
Tripathi said various government appointment committees, including the ones headed by Planning Commission member B.K. Chaturvedi and Kirit Parikh, observed that GAIL, which is essentially a gas transmission and marketing company, should be kept out of subsidy sharing.
The Parikh committee said there should not be any subsidy burden on GAIL as it was a distribution company rather than an upstream company.
Despite the recent hike in fuel prices, the government will still have to give Rs 122,000 crore in subsidies.
At present, the government provides a subsidy of Rs 6.13 on every litre of diesel, Rs 353.72 per LPG cylinder and Rs 24.98 per litre on PDS kerosene.
During the first quarter of the current fiscal, upstream firms may have to chip in Rs 14,446 crore, which is one-third of the retailers losses. Of this, ONGC may have to contribute Rs 12,123 crore, Oil India Rs 1,640 crore and GAIL, Rs 683 crore.
K. Ravichandran, co-head (corporate ratings) of Icra, said concerns remained on the government compensating retailers for losses incurred on selling fuels below cost.