Rs 8,000-crore subsidy for oil companies okayed

The government on Monday approved Rs 8,000 crore (Rs 80 billion) in cash subsidy to state-owned fuel retailers to make up for half of the revenues they lost on selling diesel, domestic LPG and kerosene below cost in the third quarter.

"The finance ministry has issued a letter approving Rs 8,000 crore in cash compensation for the October-December quarter," an oil ministry official said.

Indian Oil Corporation, the nation's largest fuel retailer, will get Rs 4,442.45 crore (Rs 44.424 billion), Bharat Petroleum Corp Rs 1,809.85 crore (Rs 18.098 billion) and Hindustan Petroleum Corporation Rs 1,747.70 crore (Rs 17.477 billion).

The three companies had last week postponed announcing their third quarter financial results in anticipation of the government subsidy announcement, without which they would have posted losses.

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The official said IOC, BPCL and HPCL lost a shade less than Rs 16,000 crore (Rs 160 billion) revenue on selling diesel, domestic LPG and kerosene below their imported cost.

Of this, upstream firms Oil and Natural Gas Corp, Oil India Ltd and GAIL India Ltd made up Rs 5,198 crore (Rs 51.98 billion) by way of discounts on crude oil and petroleum products they sell to the three retailers. ONGC chipped in Rs 4,222 crore (Rs 42.22 billion), OIL Rs 558 crore (Rs 5.58 billion) and GAIL Rs 418 crore (Rs 4.18 billion).

The subsidy approved on Monday is less than Rs 10,000 crore (Rs 100 billion) compensation that the oil ministry was seeking.

"For the first six months, the finance ministry had previously approved Rs 13,000 crore (Rs 130 billion) and now with today's Rs 8,000 crore, the total subsidy from the government so far this fiscal is Rs 21,000 crore (Rs 210 billion)," the official said.

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IOC, which was supposed to announce third quarter results on January 25, has now scheduled board meeting on February 10.

Similarly, BPCL has postponed the January 31 board meeting for the third quarter results to February 9 while HPCL put off its January 27 meet to February 11.

While, petrol price was freed from the government control in June, state oil firms continue to sell diesel, domestic LPG and kerosene at government ruled prices which is substantially lower than cost of production.

IOC, BPCL and HPCL currently lose Rs 6.80 per litre on diesel, Rs 18.66 per litre on kerosene and Rs 366 per 14.2-kg LPG cylinder.