New Delhi: The government will pay Rs25,000 crore additional cash subsidy to state-owned fuel retailers to make up for part of the revenue they lost on selling auto and cooking fuel below cost this fiscal.
The finance ministry on 7 February issued a “comfort letter” to Indian Oil Corp. Ltd (IOC), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL) sanctioning Rs25,000 crore for part of the revenue they lost on selling diesel, domestic LPG and kerosene below cost, official sources said.
Previously, the government had released Rs30,000 crore subsidy. With the latest sanction it has met about 44% of the Rs124,854 crore revenue the three firms together lost on selling auto and cooking fuel below cost during the April-December period this fiscal.
Of the latest sanction, IOC would get Rs13,474.56 crore, BPCL Rs5,987.25 crore and HPCL Rs5,538.19 crore.
Sources said the finance ministry has only issued a comfort letter which the oil companies will account as receivables to post decent third quarter earnings. Actual cash will flow only after Parliament approves supplementary demands for grants or additional spending.
IOC, BPCL and HPCL lost Rs39,268 crore in revenue on selling diesel, LPG and kerosene at government controlled rate in October-December quarter. Of this, about Rs15,000 crore will be made good up upstream firms like Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL).
Fuel retailers currently lose Rs9.22 a litre on diesel, Rs31.60 per litre on kerosene and Rs481 on every 14.2 kg LPG cylinder.
They lose Rs443 crore per day of sale of the three fuel.
The finance ministry pays cash subsidies to state oil retailers while state-run upstream companies—ONGC, OIL and GAIL India Ltd—sell crude oil and products like LPG products at a discount.
From the previous Rs30,000 crore dole, IOC had got about Rs16,100 crore, while HPCL and BPCL’s was about Rs6,670 crore, and Rs7,200 crore respectively, sources added.
Upstream firms have till now paid Rs45,000 crore in fuel subsidy.