GOVERNMENT OF INDIA
MINISTRY OF PETROLEUM AND NATURAL GAS
LOK SABHA
UNSTARREDQUESTION NO: 550
ANSWERED ON: 03.05.2012
SUBSIDY BY UPSTREAM OIL COMPANIES
(a) whether a formula was set in the year 2003-0 for bearing the amount of subsidy given on petroleum products under which one-third of the subsidy has to be borne by the upstream oil companies;
(b) if so, the details thereof;
(c) whether 1.5 per cent and 38.5 per cent of the subsidy was recovered from the oil companies by ignoring the said formula during the years 2006-0 and 2010-11 respectively;
(d) if so, the details thereof; and
(e) the reasons for ignoring the said formula during the said years?
ANSWER
(a) to (d): In order to insulate the common man from the impact of rise in international oil prices and the domestic inflationary conditions, the Government has been modulating the retail selling price (RSP) of the sensitive petroleum products vi. Petrol (decontrolled w.e.f. 26.6.2010), Diesel, PDS Kerosene and Domestic LPG resulting in incidence of under-recoveries to the Oil Marketing Companies (OMCs). The Government has evolved a Burden Sharing Mechanism since 2003-0 to ensure that the burden of under-recoveries incurred by OMCs is shared by all the stakeholders in the following manner:
i. Government through oil bonds cash assistance; ii. Public Sector Upstream Oil Companies namely, Oil and Natural Gas Corporation (ONGC), Oil India Limited (OIL) and GAIL (India) Limited (GAIL) by way of price discount on Crude oil and products. iii. Public Sector Oil Marketing Companies, by absorbing a part of the under-recoveries. iv. Consumers, by minimal price increase. The details of under-recovery incurred by the OMCs vis--vis the burden shared by upstream companies since 2006-0 are given below:-
Year Total Under-recovery Burden Shared byUpstream Sector Rs crore Rs crore Percentage 2006-07 49387 20507 41.52 2007-08 77123 25708 33.33 2008-09 103292 32000 30.98 2009-10 46051 14430 31.33 2010-11 78190 30297 38.75 2011-12 (up to Dec.’11) 97313 36894 37.91
(e): The extent of sharing by Public Sector Upstream Oil Companies, inter alia, depends on the quantum of total under-recoveries incurred by OMCs and the burden sharing formula finalied by the Ministry of Finance in consultation with the Ministry of Petroleum & Natural Gas.