Govt okays Rs 20,000 crore more subsidy for oil cos
New Delhi   13-May-2011

The government on Thursday approved Rs 20,001 crore in additional cash subsidy to state-owned oil companies to compensate them for selling fuel below cost in 2010-11 fiscal. With this, the government has paid a total of Rs 40,912 crore in subsidy to oil companies in 2010-11 financial year, an oil ministry official said here.

“The finance ministry today issued letter giving Rs 11,027 crore in cash compensation to IndianOil (IOC), Rs 4,595 crore to Bharat Petroleum (BPCL) and Rs 4,379 crore to Hindustan Petroleum,” the official said. It had in two previous installments given Rs 20,911 crore to make up for part of the revenues oil companies lost on selling diesel, domestic LPG and kerosene below cost.

The cash subsidy payout is more than half of the over Rs 78,000 crore that the three firms lost on selling auto and cooking fuel below their imported cost in 2010-11 fiscal. Upstream firms like Oil and Natural Gas Corporation (ONGC) will chip in about Rs 25,750 crore, leaving the fuel retailing firms to fed over Rs 11,000 crore of revenue losses by themselves.

The official said fuel retailers were demanding Rs 30,000 crore in cash compensation but finance ministry gave Rs 20,001 crore. While, petrol price was freed from the government control in June, oil companies continue to sell diesel, domestic LPG and kerosene at government ruled prices which is lower than cost of production. IOC, BPCL and HPCL lose Rs 18.19 per litre on diesel, Rs 29.69 per litre on kerosene and Rs 329.73 per LPG cylinder.