Oil retailers get Rs20,000cr subsidy relief from govt

In a relief for the oil marketing companies, which are running up huge losses from selling fuel at state-dictated rates, the government on Thursday approved an additional cash subsidy transfer of Rs20,000 crore for 2010-11.

''The finance ministry has informed the petroleum ministry that it will provide Rs11,027 crore in cash compensation to Indian Oil Corp (IOC), Rs4,595 crore to Bharat Petroleum (BPCL) and Rs4,379 crore to Hindustan Petroleum,'' an official said. The funds will however be available only after parliamentary approval.

With this, the government's total outgo in subsidy to oil firms has doubled to Rs40,912 crore for 2010-11. It had given Rs20,911 crore in two previous tranches to make up for some of the revenue loss on selling diesel, domestic LPG and kerosene below cost.

While petrol prices have been theoretically freed from government control since last year, the retailers continue to sell it below cost – since the government controls all three retailers, in practice it still keeps a grip on the pricing of the 'luxury' fuel.

The amount announced on Thursday is still well below the Rs30,000 crore sought by the oil retailers. However, they can pin some hope on the fact that the government is almost certain to raise fuel prices next week.

An empowered group of ministers was expected to meet earlier this week to decide on the amount of increase in prices of diesel, kerosene, and domestic cooking gas (LPG), but the meeting was postponed due to the non-availability of some ministers. It is now scheduled for 17 or 18 May.

IOC, BPCL and HPCL currently lose Rs18.19 per litre on diesel, Rs29.69 per litre on kerosene and Rs329.73 per 14.2-kg LPG cylinder. They are expected to lose total revenue of around Rs1.82 lakh crore in the current fiscal.

The oil marketing companies or OMCs as they are called in Indian parlance are slated to post their financial results by the end of this month. Earlier this year, IOC, HPCL and BPCL had postponed their board meetings to consider the financial results for the October-December 2010 quarter as they were yet to receive compensation from the government.