The Union Govt decided to bear entire LPG subsidy for FY- 2015-16

Highlights:  

  • The government has decided to bear the entire domestic cooking gas subsidy in 2015-16.
  • Companies like ONGC, Oil India and Gail India have asked for removal of the subsidy burden on them.
  • Based on average crude oil price of $60/barrel, LPG subsidy for FY- 2016 is estimated at R18,000 crore and assuming crude at $70/barrel, it could be in the vicinity of Rs 25,000 crore.
  • For kerosene, the under-recovery burden is expected to be around Rs 13,000 crore assuming average crude oil price at $60/barrel and it could go up to Rs 16,500 crore if crude price moves northwards to around $70/barrel.
  • In FY- 2014, the under-recovery on kerosene stood at Rs 30,575 crore while it was Rs 46,458 crore for LPG.
  • The budget allocation of Rs 30,000 crore (Rs 22,000 crore for LPG and Rs 8,000 crore for kerosene) should be enough to meet fuel subsidy bill in this fiscal.
  • ONGC, Oil India and GAIL (India) - forked out Rs 42,822 crore for the oil subsidy in FY- 2015.
  • The government paid another Rs 27,409 crore towards compensating OMCs.
  • The subsidy burden on upstream oil companies had increased from Rs 32,000 crore (30% of the total under-recovery) in 2008-09 to Rs 67,021 crore (48% of the total subsidy bill) in FY- 2014.
  • Finance minister Arun Jaitley in his Union Budget for 2015-16 estimated petroleum subsidy at Rs 30,000 crore, 50.22% less compared with the revised estimate of Rs 60,270.00 crore for 2014-15.
  •  The 2015-16 Budget estimated India’s subsidy bill at Rs 2.43 lakh crore, around 9% below the revised estimate of Rs.2.66 lakh crore for 2014-15.
  • The reduction has been aided by the fall in the price of crude oil, the decontrol of diesel and the direct benefit transfer scheme for disbursing LPG subsidy.
  • The success of 5% disinvestment in India's largest explorer ONGC is vital for the Narendra Modi-led government to meet its ambitious disinvestment target of Rs 69,500 crore.
  • At present , ONGC is the biggest PSUs of India,overtaking NTPC.