The Telegraph
Wednesday , January 29 , 2014
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Subsidy pressure on oil companies

New Delhi, Jan. 28: State-owned ONGC will have to cough up almost Rs 14,000 crore to bridge the gap between the price of selling fuels by oil marketing PSUs and their costs during October-December.

Overall, the oil ministry has asked ONGC and Oil India to give Rs 15,937.59 crore to make up for 40 per cent of the Rs 39,725-crore revenue that the marketeers lost on selling diesel, domestic LPG and kerosene at government-controlled rates in the October-December quarter, officials said.

ONGC’s share of the burden will be Rs 13,764.11 crore, while Oil India will pay Rs 2,173.48 crore. Gas utility GAIL India will not pay any subsidy in the third quarter as the government had capped its subsidy at Rs 1,400 crore for the current fiscal.

Sources said ONGC’s subsidy burden in the third quarter would be about 10 per cent higher than the Rs 12,433 crore it paid in the same period of the previous fiscal. Oil India’s burden will also be 10 per cent higher than the Rs 1,948 crore paid during the corresponding period last fiscal.

During April-September, retailers IOC, BPCL and HPCL together lost Rs 60,907 crore in revenue on selling diesel and cooking fuel. Of this, ONGC paid Rs 26,417.82 crore, Oil India, Rs 4,215.76 crore and GAIL, Rs 1,400 crore.

The government provided Rs 17,772 crore. The unmet revenue loss in the first half of the fiscal was Rs 11,101.42 crore.

ONGC had stated that its subsidy outgo of about Rs 26,418 crore in April-September had dented net profit by Rs 14,752 crore and a higher subsidy in the third quarter would further dent its profitability.

Price plea

Oil minister M. Veerappa Moily said he would approach the cabinet soon to seek a minimum $65 per barrel price for explorers such as ONGC to enable them to scout for oil and carry out exploration.

The move is expected to help in bringing 70 million tonnes of oil to production. “We will soon approach the cabinet on the issue of capping the subsidy share of upstream companies,” he said.

The Parikh committee had suggested a slab-based subsidy sharing formula for upstream companies. It had said that ONGC and Oil India’s share of the total subsidy should be 40 per cent if crude oil prices were below $80 a barrel; beyond $80, 25 basis points would be added to the share for each increase of $1 per barrel.

If prices were above $120 a barrel, the upstream contribution was suggested at half the crude oil price.