We will soften low oil price-hit ONGC’s subsidy blow: Pradhan

Oil Ministry is keen to protect state-owned ONGC from subsidy burden in the March quarter as volatility in crude oil prices has hit its finances, Petroleum Minister Dharmendra Pradhan said on Monday. Oil and Natural Gas Corp (ONGC) met over 54 per cent of the Rs 67,091 crore loss that fuel retailers incurred on selling diesel, kerosene and LPG at government-controlled rates during the first nine months of the current fiscal.

The government chipped in only one-third by way of cash subsidy despite slump in international oil prices leading to halving of the net price realised by ONGC.

Pradhan said his ministry was “in touch” with the Finance Ministry for compensation of losses to be incurred by state oil companies during January-March quarter. “We are in touch with Finance Ministry for working out the subsidies sharing mechanism for fourth quarter,” he said. “We have to protect the interest of ONGC and the subsidies will be calculated keeping in mind the volatility in crude prices.” 

Out of the Rs 67,091 crore loss incurred on selling diesel at subsidised rates between April and October 17 and domestic LPG and kerosene through public distribution system (PDS) in the first nine months, the government provided Rs 22,085 crore as cash subsidy.

ONGC provided Rs 36,300 crore while Oil India Ltd (OIL) Rs 5,523 crore. Another Rs 1,000 crore was provided by gas utility GAIL India Ltd. For January-March, the under-recovery or revenue loss is being pegged at around Rs 7,000-8,000 crore. Pradhan said considering the volatility in crude oil prices, the interest of ONGC needs to be protected.

The fall in international oil prices has meant that ONGC’s realisation has dipped and after paying for fuel subsidy, which is in form of discount on crude oil it sells to refiners, it is left with only few dollars per barrel that are hardly sufficient to meets its expenditure.

Oil Ministry had last month proposed to exempt upstream producers from payment of any further subsidy, but the proposal is yet to be accepted by the Finance Ministry.