Govt directs ONGC to pay record Rs 56,384 cr in subsidy
The government has ordered ONGC to pay a record Rs 56,384 crore in subsidy to help state-owned fuel retailers cover part of the losses they incurred.
New Delhi: The government has ordered Oil and Natural Gas Corp (ONGC) to pay a record Rs 56,384 crore in subsidy to help state-owned fuel retailers cover part of the losses they incurred on diesel and cooking fuel in 2013-14.
The Oil Ministry on May 21 asked ONGC and other state oil and gas producers Oil India and GAIL to shell out Rs 67,021.14 crore to cover for about 48 percent of over Rs 140,000 crore loss retailers Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) incurred on selling diesel, LPG and kerosene below cost in 2013-14.
The government will chip in Rs 70,772 crore by way of cash subsidy, official sources said.
Retailers sell diesel, domestic cooking gas (LPG) and kerosene at rates way below cost. The losses they incur is compensated by way of cash subsidy from government as well as assistance from upstream firms like ONGC.
For 2013-14, ONGC's subsidy share has been fixed at Rs 56,384.29 crore, 14 percent higher than Rs 49,421 crore subsidy payout in previous 2012-13 fiscal, they said.
OIL has been asked to pay 11 percent more subsidy at Rs 8,736.85 crore while GAIL's subsidy output has been reduced by 30 percent to Rs 1900 crore because it no longer gets subsidised feedstock for manufacturing LPG.
Sources said the government had for the first three quarters paid the fuel retailers Rs 35,772 crore in cash subsidy and will pay another Rs 35,000 crore for the fourth quarter ended March 31, 2014.
Of the additional subsidy, IOC will get Rs 18,504.62 crore, HPCL Rs 6,938.46 crore and BPCL Rs 9,556.92 crore. For the fiscal 2013-14, IOC will get Rs 37,182.27 crore in cash subsidy, HPCL Rs 15,215.45 crore and BPCL Rs 18,374.28 crore.
ONGC says its 2012-13 net profit should have been Rs 49,339 crore and not Rs 20,926 crore it reported had it not paid fuel subsidies.
Sources said out of the upstream share of Rs 67,021.14 crore, IOC will get Rs 34,673.59 crore, BPCL Rs 15,576.78 crore and HPCL Rs 16,770.77 crore.
The government subsidy and upstream support should help fuel retailes report healthy profits for 2013-14 when they report earnings next year. IOC and BPCL are scheduled to report fourth quarter and 2013-14 earnings on May 29, while HPCL will do so on May 28.
Gas utility GAIL will announce its earnings on May 26 and ONGC on May 29.