ONGC, GAIL may be exempt from kerosene subsidy

The ministry of petroleum and natural gas may spare Oil and Natural Gas Corporation (ONGC) and GAIL India Ltd (GAIL) from the burden of subs...

The ministry of petroleum and natural gas may spare Oil and Natural Gas Corporation (ONGC) and GAIL India Ltd (GAIL) from the burden of subsidy on kerosene, which the two share along with the other oil marketing companies. The total subsidy that is borne by these two oil companies for all petroleum products including petrol, diesel and LPG is to the extent of Rs 3,000 crore each year.

GAIL chairman and managing director Proshanto Banerjee said the ministry has assured the company that it would not have to shell out any amount to bear the burden of kerosene subsidy.

However, no formal communication has been sent out by the ministry, either to GAIL or ONGC in this regard.

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ONGC and GAIL have been sharing the subsidy on all petroleum products for the last three years. Earlier, the burden was shared only by the oil marketing companies — IOC, HPCL, BPCL and IBP Ltd.

Banerjee said his company’s outgo on account of subsidy on kerosene alone is not known. The overall subsidy borne by GAIL for all products for the third quarter of FY05 is expected to be about Rs 250 crore. He added that the ministry has always released subsidy figures for all the products together and hence is it not known how much the subsidy on kerosene alone is.

A senior ONGC official confirmed that the ministry is in the process of discussing the issue of subsidy.

In fact, ONGC has pointed out to the ministry that the subsidy should not be borne by it since it is not involved in marketing these petroleum products.

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Apart from the oil products, ONGC also has to bear the burden of subsidy on gas. The gas sold by ONGC is priced at 60 per cent below the market price.

The only petroleum product on which ONGC is allowed to charge market price is crude. This has come into force after the Administered Price Mechanism (APM) was dismantled three years ago.

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