New Delhi: In a boost to state-run oil marketing companies, the government has agreed to give an additional Rs3,000 crore to them to make up for part of revenue they lost on sale of fuel below cost.
“I am told that Ministry of Finance has released an additional Rs3,000 crore in subsidies to oil marketing companies,” oil secretary S. Sundareshan told reporters on the sidelines of a pre-event of the Petrotech 2010 oil and gas conference here.
Oil minister Murli Deora had yesterday met Finance Minister Pranab Mukherjee seeking hike in cash compensation for state-run oil companies, which lost over Rs31,000 crore on selling fuel below cost in the first half of this fiscal.
With the additional dole out, Indian Oil Corp (IOC), Bharat Petroleum and Hindustan Petroleum will get a total of Rs13,000 crore in cash to make up part of their revenue loss, he said.
The oil ministry had been asking finance ministry to make up for 50% of the revenue loss as the retailers cannot absorb more than Rs6,000-7,000 crore loss in the entire financial year.
The three firms lost Rs31,367 crore in revenues during the April-September period on selling diesel, domestic LPG and kerosene below cost.
This includes Rs2,227 crore they lost on selling petrol below cost till 25 June when its pricing was freed from the government control.
Of this revenue loss, upstream oil firms Oil and Natural Gas Corp (ONGC), GAIL India and Oil India will make up for Rs10,456 crore and about Rs10,000 crore had previously been committed by the government by way of cash compensation.
About Rs8,000 crore of unmet revenue loss will be dealt with together with the under recoveries the oil companies will incur in the second quarter of the current fiscal, Sundareshan said.
“This is not final settlement,” he said, adding the final compensation to the fuel retailers will be decided at the end of the fiscal.
The government on 25 June freed petrol price from its control resulting in a hike of Rs3.50 per litre.
Rates have subsequently been raised twice by almost a rupee, in step with rise in the international rates. Petrol now costs Rs52.55 a litre in Delhi.
Diesel prices were raised by Rs2 per litre on 25 June, and it was stated then that they will be gradually freed.
But deregulation of diesel prices has been put off for now as the move would mean a further increase in the price by Rs2.87 a litre. Diesel currently costs Rs37.71 a litre in Delhi.