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Oil Companies to Pay $11.4 Billion Fuel Subsidy for 2013-14
Jun 05, 2014

Indian government has ordered oil companies to provide $11.4 billion subsidy for 2013/14 to help cover losses of state retailers that sell fuels at cheaper rates—a jump of 12 percent from the previous year. Indian regulates retail prices of liquefied petroleum gas, kerosene and diesel to keep prices under check for the masses, leading to revenue losses at Indian Oil Corp , Bharat Petroleum Corp and Hindustan Petroleum Corp .

State-run Oil and Natural Gas Corp, Oil India Ltd and GAIL (India) sell crude and related products at a discount to the retailers, who also get some cash subsidies from the government.

ONGC, OIL and GAIL will jointly cover about 48 percent of the 1.4 trillion rupees ($23.82 billion) revenue losses of the retailers in the fiscal year to March 2014, while the government has agreed to provide a cash subsidy of 702.72 billion rupees.

The subsidy payout and compensation from the government should help the fuel retailers report profits for 2013-14. For 2013-14, ONGC's subsidy payout will be about 563.84 billion rupees, up 14 percent from a year earlier, while OIL's share will rise by about 11 percent to 87.37 billion rupees. GAIL's payout will drop about 30 percent to 19 billion rupees as dwindling local gas supplies forced it to import costlier liquefied natural gas. 

In the three quarters to December, ONGC paid a subsidy of 401.82 billion rupees while OIL's share was 63.89 billion rupees.

The government, which had exempted GAIL from paying further subsidy on top of the 14 billion rupees it paid for the April-September period, asked for another 5 billion rupees.

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