The Rs 8,200 crore (Rs 82 billion) loss from not increasing domestic cooking gas and kerosene prices despite rise in cost will partly be borne by upstream firms Oil and Natural Gas Corporation and Gail, and partly recovered from selling petrol and diesel above the cost, Petroleum Minister Ram Naik said on Tuesday.

Oil marketing firms -- Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd -- will bear the remaining one-third loss, he told reporters in New Delhi, but ruled out any immediate increase in petrol and diesel prices.

With assembly polls in four crucial states in mind, the government had last month decided not to increase prices of LPG and kerosene for a year. The government subsidy of Rs 45.17 per LPG cylinder and Rs 1.63 a litre on kerosene fell way short of cost and the firm international prices would have necessitated an increase of Rs 106 per cylinder in LPG prices and Rs 3 per litre in kerosene.

ONGC will sell crude oil and LPG to oil marketing firms at a discount, thereby taking a hit of Rs 2,100 crore (Rs 21 billion) this fiscal. Similarly, Gail will bear a loss of Rs 300 crore (Rs 3 billion) to them selling LPG at a discount.

Besides, IOC, BPCL and HPCL will recover about Rs 2,700 crore (Rs 27 billion) by selling petrol and diesel slightly above the cost. The remaining of the Rs 8,200 crore estimated loss for 2003-04 would be directly borne by the three oil-marketing firms.

Naik said the country's largest LPG producer Reliance has been kept out of the subsidy sharing scheme.

Oil marketing companies are selling petrol and diesel at slightly more than the cost to make up for under-recoveries on LPG and kerosene since February this year.

While the government did not allow them to increase retail selling price of LPG and kerosene despite rising cost, it also did not increase the subsidy provided on the two mass consumed cooking medium.

"The oil marketing companies would strive to make up for about one-third of the projected under recoveries (Rs 8,200 crore) by cross-subsidisation through other retail products (petrol and diesel)," Naik said, adding that the balance under recoveries would be equally shared amongst oil marketing companies and upstream sectors.

The oil marketing companies together lost Rs 5,400 crore (Rs 54 billion) last year as the government subsidy of Rs 67.75 per cylinder of LPG and Rs 2.45 a litre of kerosene fell way short of cost.

This year, IOC will have to further bear a loss of about Rs 1,400 crore (Rs 14 billion) under recoveries in LPG and kerosene while HPCL and BPCL will take a hit of Rs 700 crore (Rs 7 billion) each.

Naik said the state-run Oil India Ltd, a relatively smaller company with its operations concentrated in the North East region, has been exempted from sharing the under recoveries.

"On the average ONGC/Gail would allow a discount of $2.35 per barrel on crude oil and 20 per cent in LPG and kerosene prices, determined on the import parity basis," he said.

The petroleum policy and analysis cell under the ministry of petroleum & natural gas would issue detailed guidelines in this regard.

During 2002-03, subsidy on LPG was Rs 3,691 crore (Rs 36.91 billion) while that on kerosene for public distribution system was Rs 3,018 crore (Rs 30.18 billion).

For the current fiscal, subsidy on domestic LPG will come down to Rs 2,772 crore (Rs 27.72 billion) following a three-year schedule for phasing out the entire subsidy. Subsidy on kerosene would be Rs 1,947 crore (Rs 19.47 billion).

However, the petroleum ministry has been asking for a five-year phase out. This would mean the LPG subsidy this year goes up to Rs 3,326 crore (Rs 33.26 billion) while that on kerosene jumps to Rs 2,336 crore (Rs 23.36 billion).

The finance ministry provided state-run oil firms a subsidy of Rs 67.75 per cylinder on domestic LPG and Rs 2.45 a litre on Kerosene in 2002-03.

Following a three-year phase out plan, it has cut the subsidy on LPG to Rs 45.17 a cylinder and then on kerosene to Rs 1.63 a litre.

Finance ministry proposes to further cut subsidy on LPG to Rs 22.58 a cylinder in 2004-05 and that on kerosene to 81 paise a litre and eliminating it altogether in the subsequent year.