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Rediff.com  » Business » Refiners to bear part of LPG subsidy

Refiners to bear part of LPG subsidy

May 09, 2005 13:58 IST

The government is working on a plan to pass on part of the revenue loss public sector oil marketing firms are incurring on sale of liquefied petroleum gas and kerosene, to refiners, including Reliance Industries Ltd.

"We are working on policy for equitable sharing of under-recoveries (on domestic LPG and PDS kerosene) between the OMCs, upstream firms and standalone refineries," Petroleum Secretary S C Tripathi told reporters in New Delhi.

Until now, the revenue loss on LPG and kerosene was being equally divided between OMCs -- Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp -- on the one hand and upstream firms -- Oil and Natural Gas Corp, Oil India Ltd and GAIL (India) Ltd -- on the other.

Refiners like private sector Reliance Industries Ltd and Mangalore Refineries and Petrochemicals Ltd were out of the purview.

"We plan to bring refiners also in the sharing scheme," he said, but did not give details.

Ministry of Petroleum and Natural Gas estimates a revenue loss of Rs 13,720 crore (Rs 137.20 billion) in 2005-06 on selling LPG at Rs 82 per cylinder loss and kerosene being under-priced by about Rs 10 per litre.

Tripathi said the new under-recovery sharing scheme would come into effect from this quarter after private refiners are persuaded.

"We don't have a legal mechanism (to enforce subsidy sharing) and so we will persuade them to do so," he said.

"We are still in the process of discussing and hope to come up with a policy by end of this month," he said.

Tripathi said the ministry was mulling if the revenue loss on petrol and diesel should be shared in the same formula as LPG and kerosene.

Petrol and diesel are being sold at over Rs 5 per litre loss, the impact of which cumulatively would be Rs 23,400 crore (Rs 234 billion) for the full 2005-06 fiscal.

OMCs had on March 1 frozen the refinery transfer price (RTP), which is the price at which they lift products from the refineries. For petrol and diesel, the RTP was frozen on March 15.

Refiners are getting the March price for their products and not the current import-parity price.
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