Political compulsions made the govt skip another opportunity for an increase in petroleum prices. It instead decided to continue with the subsidy scheme.
NEW DELHI: Political compulsions on Thursday made the government skip another opportunity for an increase in petroleum prices. It instead decided to continue with the subsidy scheme for domestic LPG and kerosene sold through public distribution system for another three years.
The Union Cabinet in a meeting also decided to issue oil bonds worth Rs 23,457 crore for 2007-08 to partially compensate for losses incurred by oil marketing companies by selling petrol, diesel, domestic LPG and PDS kerosene at lower than international oil prices.
Upstream (oil and gas producing) government companies Oil and Natural Gas Corporation, GAIL India and Oil India Ltd would be shelling out Rs 19,227.25 crore as their share of Rs 54,935 crore under-realisation.
This is the second time that the government has extended the direct subsidy available through the budget for LPG and kerosene. The scheme was originally to expire in 2005 but was extended till March 2007.
“The Union Cabinet today gave its approval for extension of exiting subsidy schemes for a period of three more years from April 1, 2007,” said minister of information and broadcasting Priyarajan Dasmunshi.
The government will give Rs 2,680 crore as direct subsidy during 2007-08 compared to Rs 2,625 crore last year. The subsidy amount for the current year would be lower than Rs 2,840 crore budgeted in February.
Petroleum Secretary M S Srinivasan said 35%, or Rs 19,227.25 crore of the total under-realisation in revenues would be borne by upstream firms ONGC, GAIL and OIL. Last year, the upstream firms contributed Rs 20,507 crore. The remaining amount of under-recovery would be borne by IndianOil, BPCL and HPCL.
The Indian basket of crude oil has averaged about $70 per barrel during 2007-08 as against the average price of about $62 per barrel last year.
“To restore the financial health of the oil marketing companies, the government, as per the principle of equitable burden sharing among the different stakeholders and in line with a similar exercise undertaken last year, has decided that 42.7% of the total under-recoveries would be borne by the government in the form of oil bonds,” said an official note.
More than 50% of the bond amount would go to IndianOil with another 22%-23% going to BPCL and the remaining to HPCL. “We will be able to show reasonably good results. We will be taking into account bonds for six months in the second quarter results,” Sarthak Behuria, chairman, IndianOil told DNA Money.
The government shelled out Rs 24,121 crore last year in the form of oil bonds to make up for Rs 49,000 crore net under-recovery.
About one-third of the under-recoveries would be shared by the upstream oil PSUs in the form of discounts on crude oil and products. Further, the Subsidies Schemes for PDS Kerosene and domestic LPG which were available till March, 2007 have been extended till March, 2010.
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