Good news for oil marketing companies as Finance Ministry agreed to dole out a record Rs100,000 crore towards diesel and cooking fuel subsidy in 2012-13 but wants pricing formula to be changed from current year to cut down the outgo.
Finance Ministry, which had previously given out cash subsidy of Rs55,000 crore, agreed to give Rs40,000-45,000 crore more to cover for unmet revenue losses on fuel sale in the fiscal year ending March 31, 2013.
The agreement was reached during a meeting Prime Minister Manmohan Singh had with Finance Minister P Chidambaram and Oil Minister M Veerappa Moily here today.
"It has been sorted out," Moily told PTI after the meeting. Oil Ministry had been pressing for early release of the remaining subsidy of 2012-13 fiscal as retailers Indian Oil (IOC), Hindustan Petroleum (HPCl) and Bharat Petroleum (BPCl) have to close accounts by month end.
"We have to get unmet under-recoveries and thats why we met," he said on the meeting.The three retailers in 2012-13 lost Rs161,029 crore on selling diesel, domestic lPG and kerosene at Government controlled rates which are way below market price.
Of this, the Government has provided Rs 55,000 crore by way of cash subsidy and about Rs45,000 crore was made good by upstream firms like ONGC.
There remained an unmet under-recovery or revenue loss of about Rs60,000 crore. Upstream firms are expected to chip in another Rs15,000 crore and the rest had to come from Finance Ministry.
"The Finance Ministry has agreed to meet the under- recoveries. The issue has been sorted out," Moily said.
In 2011-12, when oil firms lost Rs138,541 crore in revenue on fuel sales, the Government gave out Rs83,500 crore by way of cash subsidy. This was more than Rs41,000 crore in doled out in 2010-11 and Rs26,000 crore in 2009-10.
Upstream firms had provided for about 40 per cent or Rs55,000 crore of the under-recovery in 2011-12, up from Rs30,297 crore in 2010-11 and Rs14,430 crore in 2009-10.
Moily said issue of changing fuel pricing norm to export parity has been referred to an expert panel led by Kirit Parekh.