GAIL seeks exemption from payment of fuel subsidies

GAIL seeks exemption from payment of fuel subsidies

New Delhi: State-run gas utility GAIL India Ltd on Monday said it should be exempted from payment of fuel subsidies as it does not get any upside from rise in crude oil or natural gas price.

GAIL along with Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) have to compensate for at least one third of the revenue that fuel retailers lose on selling auto and cooking fuel at the government controlled rates.

“We have been saying that GAIL should be out of subsidy sharing mechanism as unlike oil and gas producer, we do not get any incremental revenue on increase in oil and gas price," GAIL chairman and managing director B C Tripathi told reporters here.

Upstream firms contributed 30,297 crore or 38.75% of the total revenue loss of 78,189 crore in 2010-11 fiscal. GAIL’s share in this was 2,111 crore or 6.97% of the total upstream share.

ONGC, whose revenue increases with rise in crude oil prices, paid 24,892 crore, or 82.16% of the upstream contribution, towards fuel subsidies.

Tripathi said various government appointment committees, notably ones headed by Planning Commission member B K Chaturvedi and Kirit Parikh, too, have opined that GAIL, which essentially is a gas transmission and marketing company, should be kept out of subsidy sharing mechanism.

After the last week’s government decision to raise diesel, domestic LPG and kerosene price together with customs and excise duty reductions to cut revenue loss of fuel retailers, he said GAIL’s subsidy share during current fiscal is likely to come down to 2009-10 levels.

In 2009-10, GAIL paid a subsidy of 1,327 crore. This was 9.20% of the total upstream contribution of 14,430 crore. In that year, upstream contribution was 31.33% of the total revenue loss of 46,051 crore.

During the first quarter of the current fiscal, upstream firms may have to chip in 14,446 crore, roughly one-third of the retailers revenues. Indian Oil, Bharat Petroleum and Hindustan Petroleum lost on selling diesel, domestic LPG and kerosene below cost.

Of this, ONGC may have to contribute 12,123 crore, OIL 1,640 crore and GAIL 683 crore.

Tripathi said GAIL will import at least one shipload of liquefied natural gas (LNG) every month to make up for fall in domestic gas output. “We have already tied up import of 2 cargoes in July."

Reliance Industries’ eastern offshore KG-D6 field has seen output fall from 61.5 million standard cubic meters per day to less than 48 mmscmd. LNG costs about $12.5 per million British thermal unit, double the price of KG-D6 gas.