ONGC and other state-run explorers may have to pay about Rs 10,900 crore in fuel subsidy after Finance Ministry has agreed to provide only Rs 5,085 crore in cash subsidy for the December quarter.
Out of the Rs 15,981 crore of revenue losses fuel retailers incurred on selling LPG and kerosene at government-controlled rates in October-December, the Finance Ministry has agreed to make good only less than one-third or Rs 5,085 crore by way of cash subsidy, sources said.
The remaining Rs 10,896 crore will now have to be borne by Oil and Natural Gas Corp (ONGC) and Oil India Ltd. ONGC may have to shell out close to 80 per cent of this amount (Rs 8,716 crore).
Sources said efforts are being made to impress on Finance Ministry to give out more as the subsidy payout for ONGC and OIL is unsustainable given that oil prices have halved to USD 50 per barrel.
In the first half of current fiscal, fuel retailers IOC, BPCL and HPCL had together lost Rs 51,110 crore in revenue on selling fuel below cost. Most of this was made good by way of Rs 31,926 crore dole from upstream players and Rs 17,000 crore coming from Budget as cash subsidy.
Oil Ministry, they said, had Rs 22,101 crore in subsidy to cover for losses on LPG and kerosene sale in the second half of current fiscal so as to almost exempt ONGC and OIL from any payments. This was because ONGC and OIL hardly made any money at prevailing global oil prices of about USD 50 per barrel.
Sources said the gross-realisation of ONGC during October-December was USD 75-76 per barrel and after accounting for subsidy payout, which are in form of discounts it will give on crude oil sold to IOC, BPCL and HPCL, the net realisation was likely at USD 35-36.
ONGC’s cost of production is around USD 40 per barrel.
Under-recoveries, or revenue retailers’ loss on selling fuel below cost, is projected at Rs 74,773 crore in full 2014-15 fiscal.
Out of this, Rs 51,109.53 crore was in first half, which was met by Rs 17,000 crore in government subsidy and ONGC paying Rs 26,841 crore. OIL paid Rs 4,085 crore and gas utility GAIL paid Rs 1,000 crore.