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GAIL seeks exemption from payment of fuel subsidies

June 27, 2011 15:23 IST

State-run gas utility GAIL India on Monday said it should be exempted from payment of fuel subsidies as it does not get any upside from rise in crude oil or natural gas price.

GAIL along with Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) have to compensate for at least one third of the revenue that fuel retailers lose on selling auto and cooking fuel at the government controlled rates.

"We have been saying that GAIL should be out of subsidy sharing mechanism as unlike oil and gas producer, we do not get any incremental revenue on increase in oil and gas price," said GAIL Chairman and Managing Director B C Tripathi.

Upstream firms contributed Rs 30,297 crore (Rs 302.97 billion) or 38.75 per cent of the total revenue loss of Rs 78,189 crore (Rs 781.89 billion) in 2010-11 fiscal.

GAIL's share in this was Rs 2,111 crore (Rs 21.11 billion) or 6.97 per cent of the total upstream share. ONGC, whose revenue increases with rise in crude oil prices, paid Rs 24,892 crore (Rs 248.92 billion), or 82.16 per cent of the upstream contribution, towards fuel subsidies.

Tripathi said various government appointment committees, notably ones headed by Planning Commission Member B K Chaturvedi and Kirit Parikh, too, have opined that GAIL, which essentially is a gas transmission and marketing company, should be kept out of subsidy

sharing mechanism.

After the last week's government decision to raise diesel, domestic LPG and kerosene price together with customs and excise duty reductions to cut revenue loss of fuel retailers, he said GAIL's subsidy share during current fiscal is likely to come down to 2009-10 levels.

In 2009-10, GAIL paid a subsidy of Rs 1,327 crore (Rs 13.27 billion). This was 9.20 per cent of the total upstream contribution of Rs 14,430 crore (Rs 144.3 billion).

In that year, upstream contribution was 31.33 per cent of the total revenue loss of Rs 46,051 crore (Rs 460.51 billion).

During the first quarter of the current fiscal, upstream firms may have to chip in Rs 14,446 crore (Rs 144.46 billion), roughly one-third of the retailers revenues. Indian Oil, Bharat Petroleum and Hindustan Petroleum lost on selling diesel, domestic LPG and kerosene below cost.

Of this, ONGC may have to contribute Rs 12,123 crore (Rs 121.23 billion), OIL Rs 1,640 crore (Rs 16.4 billion) and GAIL Rs 683 crore (Rs 6.83 billion).

Tripathi said GAIL will import at least one shipload of liquefied natural gas (LNG) every month to make up for fall in domestic gas output.

"We have already tied up import of 2 cargoes in July." Reliance Industries' eastern offshore KG-D6 field has seen output fall from 61.5 million standard cubic meters per day to less than 48 mmscmd. LNG costs about USD 12.5 per million British thermal unit, double the price of KG-D6 gas.

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