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Business News/ Politics / Policy/  Oil subsidy insufficient to compensate retailers this fiscal: Moody’s
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Oil subsidy insufficient to compensate retailers this fiscal: Moody’s

The govt will need to reimburse `78,000 crore to fully compensate fuel retailers for the under recoveries

Moody’s estimates fuel subsidy burden at `1.42 trillion for the fiscal year ending 31 March. Photo: Pradeep Gaur/MintPremium
Moody’s estimates fuel subsidy burden at `1.42 trillion for the fiscal year ending 31 March. Photo: Pradeep Gaur/Mint

New Delhi: Moody’s Investors Service said the 80,800 crore fuel subsidy allocated by the government for the year ending 31 March will not be sufficient to fully reimburse fuel retailers for selling diesel, kerosene and cooking gas at subsidized rates.

Moody’s said on Wednesday it estimates India’s total fuel subsidy burden at 1.42 trillion for the fiscal, which would be shared between the government and state-controlled oil and gas explorers companies. Excluding the oil and gas explorers’ share of fuel subsidies for the fiscal year, which it estimates at about 64,000 crore, the government will need to reimburse fuel retailers 78,000 crore in order to fully compensate them for the under recoveries.

“Excluding the 450 billion ( 45,000 crore) paid out to OMCs (oil marketing companies) in the current fiscal year for the previous fiscal year’s under recoveries, the budget provision of 808 billion leaves only 358 billion for reimbursements in the current fiscal year. This implies a shortfall of 422 billion," it added.

However, Moody’s said it still hopes that the full reimbursement for fuel retailers could be made in the fiscal year starting 1 April. “Such adjustments have been made by the government in the past. The situation is more complicated this year with elections in May 2014 that may result in a change in government, which could adopt different policies," it held. The government has allotted 57,300 crore for fuel subsidies for the fiscal year ending 31 March 2015.

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Published: 19 Feb 2014, 05:25 PM IST
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