Informist, Friday, Apr 21, 2023
–Fin min source: 300-bln-rupee capital support to oil retailers not subsidy
By Priyasmita Dutta and Sagar Sen
NEW DELHI – The finance ministry has no plans to provide fuel subsidy in the ongoing financial year to oil marketing companies, which are batting for relief owing to the heating up of crude oil prices, a senior finance ministry official said.
“It is a monologue…the finance ministry is against the introduction of a fuel subsidy at this point,” the official told Informist.
State-owned fuel retailers and oil marketing companies incurred huge losses in 2022-23 (Apr-Mar) for not passing on higher petrol and diesel prices to consumers, in order to help the government contain inflation. Although petrol and diesel prices are deregulated in India, the three public sector fuel retailers have not hiked retail prices of petrol, diesel, and domestic cooking gas since May 2022.
This pause on prices when input costs were higher than retail selling prices led to Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp posting a combined net loss of 212 bln rupees during Apr-Sep.
Following this, in October, the government approved a one-time grant of 220 bln rupees to state-owned oil marketing companies for losses incurred on the sale of liquefied petroleum gas, which only partially compensated for the losses incurred.
Irrespective of this, the companies continued to bleed.
While retail prices have been unchanged since May, it could be safely assumed that prices would only be changed if they go down, the official said. “It is unlikely they will allow prices to change upwards,” the official added.
Global crude oil prices went through the roof in 2022-23, following Russia’s invasion of Ukraine and the subsequent supply-side bottlenecks. Prices went up to as much as $125 per barrel and hovered around $110-$120 a barrel for months.
In the latter half of March, prices softened to as much $70-$80 a barrel but spiked again after the Organization of the Petroleum Exporting Countries and its allies decided to cut production on Apr 2. Since then, prices have ranged from $80 to $90 per barrel.
The Brent crude oil contract for June delivery was last at $81.13 a barrel, against Thursday’s close of $81.10 per bbl.
The capital support of 300 bln rupees to oil marketing companies that Finance Minister Nirmala Sitharaman announced in the Budget for 2023-24 was not a one-time grant, as many have assumed, but was given to help these companies revamp their infrastructure to meet green energy standards, the official clarified.
“It was not a subsidy or grant.”
Petroleum and Natural Gas Minister Hardeep Singh Puri has been vocal in expressing his support in favour of the request of public sector fuel retailers to be compensated for losses on the sale of petrol and diesel. End
Edited by Avishek Dutta
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