Fin Min throws Rs 38K cr budget lifeline to oil firms

Their demand for refund of an interest payout of Rs 5,000 crore incurred due to the delay in payment of cash subsidy has also not been agreed to,the IOC official said.

Written by Amitav Ranjan | New Delhi | Published: May 21, 2012 2:07 am

The finance ministry will release Rs 38,500 crore from the budget for cash-strapped state-run oil marketing companies (OMCs). Also,the Department of Expenditure has directed state-run upstream firms ONGC,Oil India and GAIL India to shell out an additional Rs 1,640 crore — over the Rs 53,360 crore indicated earlier — as their share of the subsidy burden.

The government’s largesse will enable the three OMCs — IOC,BPCL and HPCL — to show net profits for the 2011-12 fiscal. The budget will now provide Rs 83,500 crore as cash subsidy out of the Rs 1,38,500 crore that the OMCs lost in 2011-12 to keep retail prices of diesel,cooking gas and kerosene low.

“Last Friday,the Department of Expenditure conveyed that it would provide Rs 38,500 crore as cash subsidy for the January-March quarter,” a senior IOC official said.

“Upstream (firms’) share in the under-recovery has been raised to 39.7 per cent from 36.75 in the last fiscal (2010-11),” the official said. Upstream firms had contested the rise in subsidy-sharing,and had asked that it be frozen at the 2010-11 level.

The OMCs too have been put at a disadvantage with the finance ministry declining to reimburse their Rs 4,870-crore loss on the sale of petrol,whose prices have not been raised due to political considerations.

Their demand for refund of an interest payout of Rs 5,000 crore incurred due to the delay in payment of cash subsidy has also not been agreed to,the IOC official said.

The petroleum ministry had asked for Rs 49,870 crore to compensate the three OMCs for selling fuels at government-controlled rates,and towards interest compensation.

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