India's finance ministry has suggested upstream companies should give a discount of $56 per barrel to state fuel retailers this fiscal year, government sources said, a move that could raise their subsidy payout by over 60 percent from a year ago.
The finance minister has assumed an average global price of $110 a barrel for the fiscal year to March 2012 and suggested that state oil marketing companies should absorb 5 percent of revenue losses on the sale of fuels, two officials with knowledge of the matter said on Wednesday. The federal government fixes the retail prices of liquefied petroleum gas, kerosene and diesel to protect the poor, leading to revenue losses to Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp.
Fuel retailers are against absorbing 5 percent of revenue losses as a delay in releasing cash subsidy has increased their borrowings and interest burden, said the sources. "Assuming an average rupee rate of 50 to a dollar, upstream firms' subsidy share will go up to about 490 billion rupees ($9.72 billion) in the current year," said one of the sources. Due to high oil prices and a depreciating rupee, oil marketing firms' revenue losses on subsidised sale of fuels are likely to rise to 1.4 trillion rupees in 2011-12 versus 782 billion rupees last year, said an oil ministry source.
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