New Delhi, May 21: The finance ministry will provide Rs 38,500 crore as cash subsidy to oil retailers for selling diesel, kerosene and domestic LPG cylinder below cost in the fourth quarter of 2011-12.
The oil ministry had asked for Rs 49,870 crore as compensation for the revenue losses suffered by IOC, BPCL and HPCL in the fourth quarter.
"The finance ministry has agreed to give Rs 38,500-crore compensation for the January-March quarter," a senior oil ministry official said.
The payout is in addition to the Rs 45,000 crore the three PSU retailers got for the first nine months of the last fiscal.
Between April and December last year, ONGC, Oil India and GAIL had contributed Rs 36,894 crore to fuel subsidy and will provide another Rs 18,106 crore in the fourth quarter.
"The share of upstream firms in total under-recoveries works out to be 39.7 per cent. In 2010-11, they had borne 36.75 per cent of the under-recoveries," the official said.
"This will impact the profitability of the upstream firms and their investment plans," a senior official of an upstream firm said.
State-owned oil firms lost Rs 81,192 crore on the sale of diesel in 2011-12, Rs 27,352 crore on kerosene and Rs 29,997 crore on domestic LPG.
The PSU retailers also suffered losses amounting to Rs 4,890 crore on the sale of petrol, the price of which has not been raised since December in spite of it being decontrolled in June 2010.
The oil marketing firms had to pay interests amounting to Rs 4,800 crore because of a delay in the payment of subsidy by the government.
"So in effect, the share of oil marketing firms would be the loss they suffered on the sale of petrol and the interest outgo," he said, adding that the oil ministry had asked for Rs 49,870 crore to compensate the three firms.
Upstream firms have been asked to shell out an additional Rs 1,640 crore ' over the Rs 53,360-crore indicated earlier ' as their share of the subsidy burden.
The cash subsidy and assistance from upstream oil companies will make up for almost all of the Rs 138,541-crore revenue loss, the official said.
"Without this, the three companies would have for sure posted huge losses."
While the global crude prices are on a downward curve, the depreciation of the rupee and increasing demand for petroleum products could result in state-owned oil firms suffering a revenue loss of Rs 208,000 crore in the current financial year.
