OMC’s losses on subsidized sale of domestic cooking gas, LPG widen by 14% in April-Dec period

Albeit the multi-year low global crude oil prices and the government’s attempts to plug leakages, the losses incurred by oil marketing companies (OMCs) on subsidized sale of domestic cooking gas or liquefied petroleum gas (LPG) have risen by 14% to Rs 34,941 crore in the first nine months of the current financial year. This rise could be attributed to subsidy diversion from household to commercial consumption apart from the increased cap of 12 cylinders per household on subsidized consumption. The under-recoveries on subsidised sales of the other two petroleum products -kerosene and diesel have declined. However,  overall, under-recoveries on the three products during the April-December 2014 period were down 33% to Rs 67,091 crore from Rs 1,00,632 crore in the year-ago period, according to the latest petroleum ministry data. OMCs’ losses on diesel sales dropped by 77% to Rs 10,935 crore during April-December 2014 from Rs 47,655 crore in the corresponding year-ago period owing to the slump in global crude prices, and the price deregulation of the automobile fuel that came into effect on October 18, 2014. Meanwhile, under-recoveries on kerosene slumped by 5.1% to Rs 21,216 crore in the April-December 2014 period on the back of stagnant domestic prices and declining crude rates, which slid to a six-year low of less than $44 a barrel on a supply glut, made worse by the slump in demand in European and Asian economies. Notably, the government has budgeted for a petroleum subsidy of Rs 65,000 crore in the current financial year, however, petroleum ministry expects overall under-recoveries to be Rs 77,000 crore for the full year, which in turn would pull down petroleum subsidy to Rs 38,000 crore in 2014-15 against Rs 85,000 crore in the previous financial year, assuming government shares 50% of the burden.