Government plans payout of Rs 20,000 Crore to oil companies hit by rising costs

The government plans to pay nearly 20,000 crore rupees ($2.5 billion) to state-run fuel retailers to partially compensate them for losses and control cooking gas prices, citing sources, Bloomberg news agency said Monday.

According to the sources familiar with the development, the Ministry of Petroleum has requested compensation of Rs 28,000 crore, but the Ministry of Finance is only accepting a cash payment of around Rs 20,000 crore. Discussions are at an advanced stage but a final decision has yet to be made, the sources said.

IOCL, BPCL and HPCL, the three largest state-run retailers, which together supply more than 90% of the country’s petroleum fuels, suffered the worst quarterly losses in years as they absorbed record international crude prices. While the aid could ease their pain, it would add pressure on government coffers which are already strained by fuel tax cuts and a higher fertilizer subsidy to combat growing inflationary pressures. .

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According to the report, the government had earmarked an oil subsidy at Rs 5,800 crore for the financial year ending in March, while the fertilizer subsidy was set at Rs 1.05 lakh crore.

These fuel refining and retailing companies, which use more than 85% of imported oil, benchmarked the fuels they produce against international prices. These rose after a global recovery in demand coincided with a reduction in fuel manufacturing capacity in the United States and a decline in exports from Russia.

State-owned oil marketing companies (OMCs) are forced to buy crude at international prices and sell locally in a price-sensitive market, while private players such as Reliance Industries have the ability to tap oil markets. more solid fuel export.

CMOs will require intervention either through price increases or government compensation to cover losses incurred, Bharat Petroleum chairman Arun Kumar Singh said last month.

India imports about half of its liquefied petroleum gas (LPG), typically used as cooking fuel. The Saudi contract price, India’s benchmark for LPG imports, has risen 303% over the past two years, while the retail price in Delhi has risen 28%, Oil Minister Hardeep Singh said on Friday. Pure.

The three companies have also been keeping gasoline and diesel pump prices low since early April to curb rising inflation.