In a bid to compensate the three oil marketing companies for the revenue loss incurred by them during the first quarter of the ongoing financial year, the Ministry of Petroleum and Natural Gas has sought a subsidy worth Rs 13,500-crore from the government.
However due to the contention of the Ministry of Finance on the amount the grant is unlikely to be issued during the forthcoming first supplementary to the budget. Commenting on the matter a senior official of the finance ministry has pointed out that during the forthcoming session the ministry will only seek parliamentary approval for Rs 14,000 crore subsidy that was due for 2009-10 fiscal. The money is due for payment to Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation Ltd for the loss that they incurred on account of selling fuel at below market prices during FY10.
Elaborating further to the matter the official said, "There will not be any provision for the current year in the supplementary, which will be presented in the monsoon session of Parliament, starting July 26. Subsidy for the current year would be given only after the sharing mechanism is decided. The two ministries have held several rounds of meetings but a final view will be taken by an empowered group of ministers". It is worth noting that the government during its budget 2010-11 had only made a provision of a mere Rs 3,108 crore for petroleum subsidy for the current year.
However due to the three companies having already accounted for Rs 14000 crore as accruals in their accounts for 2009-10, the finance ministry will now have to make additional provisions for the amount. As part of the effort the government had introduced a subsidy-sharing mechanism and has asked upstream oil and gas producing companies such as ONGC, GAIL India and Oil India Ltd to shell out Rs 6,500 crore for the April-June quarter. The move is expected to make up partially for the loss of revenue that the marketing companies have been incurring on account of selling auto and cooking fuels below international rates.
Meanwhile speaking on the matter petroleum secretary Mr. S Sundareshan said, "Under recoveries came to Rs 20,000 crore, of which Rs 6,500 crore comes from the upstream companies. We have written to the ministry of finance to contribute the rest. Discussions will be held to arrive at the final figures." It is worth noting that the under recoveries have been calculated by assuming an average crude oil price of $75 a barrel for the entire year. Adding further to the matter Mr. Sundareshan pointed out that the trade parity formula used for the calculation of under recoveries has been devised by the Rangarajan committee.