ONGC, Oil India exempted from fuel subsidy payment in Q3

State-run oil explorers, Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL), have been exempted from sharing fuel subsidy with the government as the plummeting prices of crude oil have dented revenues, robbing them of a profit in the October-December 2015-16 quarter.

Upstream firms like ONGC and OIL have to make good any revenue loss incurred by fuel retailers on selling kerosene through PDS and domestic LPG after taking into account the fixed subsidy provided by the government, according to a new fuel subsidy sharing formula approved last year.

For the October-December period, state-run fuel retailers Indian Oil Corp (IOC), Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL) together reported revenue loss to the tune of Rs6,149 crore on selling kerosene and LPG at government fixed retail price.

The government has now decided that it will pay all of the Rs3,279 crore subsidy on LPG and Rs2,870 crore on kerosene for the quarter.

As per the formula, the government was to pay a subsidy of Rs12 per litre on kerosene and Rs18 per kg on LPG, which left an unmet portion of Rs300 crore, sources pointed out.

However, since the oil companies reported a revenue loss, they have been exempted from sharing the subsidy burden, official sources said.

Kerosene is sold at a subsidized price of Rs14.96 per litre through public distribution system (PDS) while a 14.2-kg LPG cylinder for the domestic consumer costs Rs419.22 in Delhi.

While government sources say the under-recoveries of state-run fuel retailers are on sale of PDS kerosene and subsidised domestic LPG as petrol and diesel have been deregulated (market-linked) with effect from June 2010 and October 2014, respectively, it should also be noted that the government is expected to realize around Rs10,000 crore through higer excise duty impost on petrol and diesel.

For 2015-16, ''the government has approved budgetary support for PDS kerosene under-recovery at a rate of Rs12 per litre and the remaining under-recovery will be borne by the upstream companies.''