Subsidy: ONGC to pay Rs 1025 cr

Oil and Natural Gas Corp will pay Rs 1025 crore (Rs 10.25 billion) to the state-run oil retailing firms for the losses they suffered during the second quarter for selling LPG and kerosene below the cost.

As per the subsidy sharing formula devised by the ministry of petroleum and natural gas last week, ONGC, Oil India Ltd and gas firm GAIL (India) Ltd will bear one-third of the Rs 4200 crore (Rs 42 billion) under-recoveries estimated on LPG and kerosene sale in July-September quarter this fiscal.

GAIL would pay close to Rs 300 crore (Rs 3 billion) while OIL around Rs 100 crore (Rs 1 billion), senior government officials said.

The three upstream companies, which do not retail LPG or kerosene, had given Rs 1120 crore (Rs 11.2 billion) in Q1 to the oil marketing companies -- Bharat Petroleum Corp Ltd, Indian Oil Corp and Hindustan Petroleum Corp to compensate them for one-third of the Rs 3600 crore (Rs 36 billion) under-recoveries on selling the two mass-consumed cooking fuels.

ONGC had in Q1 provided Rs 799 crore (Rs 7.99 billion) while GAIL paid Rs 226 crore (Rs 2.26 billion).

Subsidy burden on LPG and kerosene, arising out of government decision not to increase prices despite rise in cost, is estimated at Rs 4200 crore (Rs 42 billion) in July-September, of which one-third would be borne by ONGC, GAIL and OIL.

In 2003-04, ONGC had paid Rs 2690 crore (Rs 26.9 billion) on LPG and kerosene subsidy and GAIL Rs 427 crore (Rs 4.27 billion).

Sources said IOC, which had received Rs 648 crore (Rs 6.48 billion) from upstream firms like ONGC, GAIL and OIL for LPG and kerosene subsidy in Q1, had lost around Rs 2300 crore (Rs 23 billion) in July-September quarter.

"While the government has limited the subsidy it provides on LPG and kerosene, the prices have not been revised upwards despite the cost spiralling by 50 per cent," they said.

After taking into account Rs 40 per cylinder subsidy that the government provides to the oil companies, LPG cylinder in Delhi was being sold at Rs 110 loss while a litre of kerosene was being under-priced by Rs 9.