New Delhi, Sept. 6: The government plans to trim the oil subsidy bill by around Rs 51,000 crore by substantially increasing the prices of diesel, domestic cooking gas and kerosene.
The oil ministry favours a hike in diesel prices by Rs 5 a litre, kerosene by Rs 2 a litre and LPG by Rs 50 per cylinder.
State-owned oil firms are likely to suffer a revenue loss of Rs 180,000 crore this fiscal against Rs 161,000 a year ago because of the depreciation of the rupee and a spike in crude prices.
However, officials said these estimates could change drastically if the tension in West Asia escalated.
“The total revenue loss this fiscal could amount to Rs 180,000 crore, even after upstream firms such as ONGC chip in Rs 70,500 crore, leaving a gap of Rs 97,500 crore to be funded,” officials said.
Officials said the losses could be cut by Rs 29,390 crore by raising the diesel price by Rs 5 per litre.
An increase of Rs 50 per LPG cylinder will trim losses by Rs 2,604 crore, while a hike of Rs 2 per litre in kerosene prices will cut losses by Rs 1,014 crore.
Together, the three hikes will bring down the government’s subsidy on fuel to Rs 50,928 crore, officials said.
In the budget for 2013-14, the government has allocated Rs 65,000 crore to oil subsidy, which is 32 per cent lower than the last fiscal’s revised estimate of Rs 96,879.87 crore.
The proposed hikes are one-time and are not part of the monthly revision in diesel rates of 50 paise.
A Re 1 fall in the value of the rupee against the dollar increases the under-recovery of the PSU oil marketing firms by about Rs 7,900 crore per annum. “If we consider the average price of Indian crude basket at $110 a barrel and the average exchange rate at $66 for the remaining fiscal, the under recovery of OMCs will increase to an unsustainable level of Rs 1,68,000 crore. If the price of international crude increases to $115 a barrel, the under-recovery will reach to around 1,81,000 crore,” officials said.