At current prices, upstream companies like ONGC and Oil India will have to bear Rs 5k-6k crore kerosene subsidy for the full year

New Delhi : The government has capped the subsidy payout on kerosene at Rs 12 per litre and domestic cooking gas (LPG) at Rs 18 per kg, with the balance loss being borne by state-run oil marketers, Oil Minister Dharmendra Pradhan said.

Kerosene through public distribution system (PDS) is sold at Rs 14.96 per litre against the actual cost of Rs 29.91. The difference between the two, Rs 14.95 per litre, is termed as under-recovery or revenue loss. While the government will provide Rs 12 to meet most of this, the remaining Rs 2.95 will be borne by oil producers ONGC and Oil India Ltd, he said.

Similarly, there is an under-recovery or loss of Rs 167.18 on sale of every 14.2-kg subsidised LPG cylinder at the current price of Rs 417.82. At current rates, all of the under-recovery is within the sanctioned subsidy limits. LPG customers are allowed 12 cylinders per every household at the subsidised rate of Rs 417.82, making for an under-recovery, or loss, of Rs 167.18 per cylinder, which the government will bear entirely.

For the first quarter of FY16, the government will provide Rs 1,733 crore cash subsidy as per the new formula to Indian Oil Corp (IOC), Rs 404 crore to Bharat Petroleum Corp Ltd (BCPL) and Rs 451 crore to Hindustan Petroleum Corp Ltd (HPCL).

On LPG, the subsidy support to IOC would be Rs 2,506 crore, BPCL Rs 1,155 crore and HPCL Rs 1,183 crore, he said.  At current prices, the upstream companies will have to bear about Rs 5,000-6,000 crore kerosene subsidy for the full year.

Pradhan said, at present, the state-owned fuel retailers incur under-recoveries on sale of PDS kerosene and subsidised domestic LPG only as petrol and diesel have been deregulated (market-linked) with effect from June 2010 and October 2014 respectively.

LPG consumers get subsidy equivalent to the under-recovery directly in their bank accounts so that they can purchase a 14.2-kg bottle at the market price of Rs 585.

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