New Delhi, May 22: The government has decided to relieve oil PSUs such as ONGC Ltd and Indian Oil Corporation of subsidy contributions to push stake sales in them.

"The government will bear the oil subsidy burden. While diesel and petrol have been deregulated, the subsidy component in LPG is transferred through the direct benefit transfer (DBT) scheme. Only under-recovery is in kerosene, for which a formula is being worked out," a senior finance ministry official said.

The official said the move would lead to a better valuation of state-owned explorer ONGC and the country's largest refiner IOC.

The government plans to sell 10 per cent stake in IOC and 5 per cent in ONGC, which is likely to fetch about Rs 19,000 crore. The Centre has set a divestment target of Rs 41,000 crore for this fiscal.

Petrol and diesel prices have been deregulated but the government sets the price of domestic cooking gas and kerosene. The difference between the market price and the retail fuel rate will be borne by the government and oil marketing companies this fiscal.

The budget has earmarked Rs 22,000 crore for subsidy on domestic LPG and Rs 8,000 crore for kerosene.

Subsidy count

IOC will get Rs 2,932 crore subsidy and Bharat Petroleum Corporation Ltd Rs 2,291 crore for selling fuel below cost in the fourth quarter of 2014-15.

However, Hindustan Petroleum Corporation Ltd will not get any cash support because of certain adjustments for past payments, sources said.

The finance ministry has sanctioned Rs 5,223 crore for fuel subsidy for the January-March quarter to cover almost the entire revenue loss that the two retailers suffered by selling LPG and kerosene at government rates.

With this, total subsidy offered by the government in 2014-15 will go up to Rs 27,308 crore. For the first three quarters, the government had provided Rs 22,085 crore. The fuel retailers had lost Rs 72,314 crore on selling diesel (up to October 17), LPG and kerosene at government rates, which were way below cost in 2014-15.

MRPL move

ONGC arm Mangalore Refinery and Petrochemicals Ltd (MRPL) plans to foray into fuel retailing by opening 100 petrol pumps.

The company posted a 9.6 per cent rise in fourth-quarter net profit at Rs 1,169.70 crore against Rs 1,067.04 crore in the same period a year ago.