Oil subsidy burden on ONGC, OIL may mount to Rs7,852 crore

The government is weighing plans to cap the price of crude oil sold by ONGC and Oil India to state refiners at $54 a barrel this financial year in a move that could hurt the finances of the state-run oil companies.

The move, aimed at easing the government's subsidy burden on selling diesel, kerosene and cooking gas below market rates, comes at a time when the average market price of crude oil stands at around $110 a barrel.

Under the current system, the two producers are entitled to the international oil price for the 28 million tonnes of crude they produce annually. A Rs54 cap of crude prices would mean an annual loss of $1.57 billion  (Rs7,852.93 crore) to the two companies.
The government has also kicked off an inter-ministerial consultations regarding this, as part of its initiatives to ease subsidy burden and help contain fiscal deficit.

The Indian basket of international crude oil prices published today by the Petroleum Planning and Analysis Cell (PPAC) under the petroleum ministry stood at $110.05 per barrel.

The prices are computed and published by PPAC on its website on a daily basis. For the last trading day of the previous week, ie, 20 January 2012, the price was based on trading figures of 19 January 2012 (previous trading day) of $110.47 per barrel.

In rupee terms, the prices were also slightly lower at Rs5,538.82 as published on 20 January 2012 against Rs5,540.45 per barrel on 19 January 2012, due to lower crude oil prices in dollar terms even though exchange rate was marginally lower at Rs50.33 a dollar against Rs50.29 a dollar on 20 January 2012.