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Fuel subsidy was underestimated in Interim budget: Moody’s

Global Rating Agency Moody’s said on Wednesday that Finance Minister P. Chidambaram has underestimated the fuel subsidy bill for the current year in his interim budget by about 40 per cent.

Moody’s estimates India’s total fuel subsidy burden at Rs. 1,42,000 crore for the fiscal year ending March 2014, it said in a statement issued in Singapore on Wednesday.

The revised estimate in the interim budget is Rs 85,480 crore. “The provision in the Government of India’s interim budget, announced on Monday, will not be sufficient to fully reimburse the under-recoveries of oil marketing companies (OMCs) including Indian Oil Corporation and Bharat Petroleum Corporation,” a Moody’s Vice President and Senior Analyst Vikas Halan has reported.

Excluding the upstream companies’ share of fuel subsidies for the full fiscal year, which Moody’s estimates at about Rs 64,000 crore, the Government will need to reimburse the OMCs Rs 78,000 crore in order to fully compensate them for the under recoveries, the statement said. These State-owned companies are compensated as the administered prices of fuels are pegged below market prices to subsidise consumers.

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