The Petroleum Ministry may have to wait longer for reimbursement of its gross under-recovery (GUR) bill for the current fiscal as the Finance Ministry is likely to roll over around Rs 48,000 crore payment to the next fiscal, thus making it a burden for the new Government which would take charge at the Centre in May 2014.
According to sources privy to the development, the Finance Ministry plans to roll over approximately Rs 48,000 crore subsidy payment (under-recovery on sale of lPG, kerosene and diesel below market rate by oil marketing companies) to be made to the Petroleum Ministry in the current financial year, beyond March 2014, as the prevailing fiscal conditions are making it difficult for the Government to bear the burden which has grown multi-fold.
Under-recovery is the gap between the controlled retail price and what the three Government-owned OMCs get on certain petroleum products. The three OMCs are Indian Oil, Bharat Petroleum and Hindustan Petroleum.
The payment, sources added, may not be part of the interim budget (or the Vote on Account which is presented by the Government when it is in the last few months of its tenure) and could be rolled over to May or June of 2014 - a time when the new Government at the helm would present its first Budget.
The problem is mainly emanating from the fact that the budgetary estimate of under-recoveries (for lPG, kerosene and diesel) for FY14 was Rs 61,000 crore, which is expected to grow two-folds to Rs 1,40,000 crore by March 31, 2014. With the burden doubling, a source having direct knowledge of the development, said that a part of the payment which comes to around Rs 48,000 crore, is likely to be shifted by the Finance Ministry to the next fiscal.
According to figures available with The Pioneer, out of the Rs 1,40,000 crore, Rs 67,000 crore of the under-recovery amount is to be paid by the upstream companies. Of the remaining estimated Rs 73,000 crore, around Rs 16,000 crore worth of subsidy amount has been disbursed by the Finance Ministry for the first two quarters of the current fiscal and an additional provision has been made for another Rs 9,000 crore.
The remaining Rs 48,000 crore, sources said, may not be refunded to the Petroleum Ministry by March of the current fiscal and could be rolled over to the next financial year.
A recent report by the global rating agency, Fitch, further underlines the fact that by the end of the current fiscal, the Finance Ministry would have to manage a huge subsidy burden. In its report, Fitch has estimated the GUR of Rs 1,47,600 crore and a subsidiary burden of Rs 88,000 crore which the Finance Ministry would have to manage.
The report also says that as an option to contain the rising GURs, the Government might have to allow a possible breach in the budgeted subsidy. Thus, the possible plan to transfer the enormous burden on the new Government seems the best way out of this mess.
An almost doubled under-recovery burden is proving to be the last straw on the Government’s back which is already battling with the ongoing economic stress. Therefore, sources pointed out that under normal circumstances some of the amount does get rolled over to the subsequent financial year, but in an election year the roll over would hurt the new Government more which would come to power after the lok Sabha polls.