ONGC may get partial relief from fuel subsidies

22 December 2008

State-run Oil and Natural Gas Corp (ONGC) is expected to get some respite from subsidising downstream oil companies with the steep fall in the prices of crude oil.

ONGC bears 33 per cent of the subsidy burden on the government-fixed prices of domestic petrol, diesel, kerosene and cooking gas or LPG. This burden is likely to be lifted from this month as the steep fall in crude prices has eroded the gains of the company.

ONGC, Oil India Ltd and GAIL India Ltd give discounts on the crude oil and petroleum products they sell to retailers, sharing at least 33 per cent of the revenue loss on fuel sales to final consumers.

However, with crude oil plummeting by over $100 to below $40 per barrel currently, the subsidised sale of crude would make ONGC's operations  impossible

Sources at the petroleum ministry said ONGC has already been informed that domestic crude suppliers have no longer to discount sales to Indian Oil, Bharat Petroleum and Hindustan Petroleum from the third week of November.

ONGC has lost Rs22,474 crore in the April-September period on fuel subsidies, and had given out discounts of another Rs3,693 crore in the October-November period.