The government on Thursday sanctioned Rs 17,772 crore (Rs 177.72 billion) cash subsidy to fuel retailers like IOC to cover for half of the revenues they lost on selling diesel and cooking fuels below cost in the September quarter.
The Finance Ministry had on Wednesday sent a letter approving Rs 8,772 crore (Rs 87.72 billion) subsidy for Indian Oil Corp (IOC), Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL). Today, it sanctioned an additional Rs 9,000 crore (Rs 90 billion), official sources said.
The three retailers had lost Rs 35,328 crore (Rs 353.28 billion) in revenues on selling diesel, cooking gas (LPG) and kerosene at government controlled rates in July-September quarter.
Less than half of this, Rs 16,729.74 crore (Rs 167.29 billion), is being made up by upstream oil and gas producers like ONGC and GAIL and now Rs 17,772 crore is coming by way of cash subsidy.
Sources said Finance Ministry had provided Rs 8,000 crore (Rs 80 billion) subsidy to cover for 31 per cent of the Rs 25,579 crore lost on diesel and cooking fuel sales in April-June.
After accounting for upstream contributions of Rs 15,303.84 crore in Q1 and Rs 16,729.74 crore for Q2 and subsidy of Rs 25,772 crore, fuel retailers are left with Rs 3101.42 crore of unmet losses.
In April-September period, the three retailers lost Rs 60,907 crore in revenues on diesel, LPG and kerosene sales.
With the additional dole, retailers will be able to book nominal profits for the second quarter. IOC is scheduled to announce its September quarter earnings tomorrow while HPCL and BPCL would do that next week.
Of the Rs 17,772 crore sanctioned, IOC would get just over Rs 9,172 crore (Rs 91.72 billion) while BPCL would get Rs 4,443 crore (Rs 44.43 billion). HPCL would get the remaining Rs 4,151.5 crore (Rs 41.51 billion).
Retailers like IOC sell diesel and cooking fuel at rates which are way below cost. The losses they incur are met by government cash subsidy as well as through support from upstream firms.
Of the Rs 16,729.74 crore (Rs 167.29 billion) that upstream firms have been asked to pay for Q2, ONGC's share will be Rs 13,796.04 crore (Rs 137.96 billion) while OIL will bear Rs 2,233.70 crore. Gas utility GAIL will pay Rs 700 crore (Rs 7 billion), sources said.
The subsidy ONGC has been asked to pay is 11.9 per cent more than Rs 12,330 crore (Rs 123.30 billion) fuel subsidy outgo in July-September quarter of 2012. It is also 9.3 per cent more than Rs 12,622 crore payout in Q1 of current fiscal.
Fuel retailers had in Q1 of current fiscal lost Rs 25,579 crore on sale of diesel and cooking fuel. Of this Rs 15,303.84 crore came from upstream firms (ONGC Rs 12,621.78 crore, OIL Rs 1,982.06 crore and GAIL Rs 700 crore).
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