The Indian government will extend an additional cash subsidy of Rs.38,500 crore to public sector oil companies, as part of compensation for selling diesel, domestic LPG and kerosene below cost during the last fiscal, reports said, quoting a top oil ministry official.
This is in addition to the cash payout of Rs.45,000 crore to Indian Oil Corporation Ltd. (IOC), Hindustan Petroleum Corporation Ltd. (HPCL) and Bharat Petroleum Corporation Ltd. (BPCL) in the first nine months of FY12.
The three firms had lost a record Rs.1,38,541 crore on selling diesel, domestic LPG and kerosene at government- controlled rates that were way lower than market price.
Together with the additional payout agreed, the government will make up 60 percent or Rs.83,500 crore of the total revenue loss.
Upstream companies Oil and Natural Gas Corporation Ltd. (ONGC), Oil India and GAIL India have been asked to shell out an additional Rs.1,640 crore, over the Rs.53,360 crore indicated earlier, as their share of the subsidy burden.
The cash subsidy and assistance from upstream oil companies would bridge almost all of the Rs.1,38,541 crore of revenue loss, the official said, adding that without this, the three companies would have for sure posted huge losses.
The share of upstream companies (in total under recoveries or revenue loss) works out to be around 40 percent. In 2010-11, they had borne around 37 percent of the under recoveries, he said.
Besides losses on diesel, domestic LPG and kerosene, state fuel retailers also lost Rs.4,890 crore on sale of petrol, a commodity which was decontrolled in June 2010 but rates of which have not been raised due to political considerations.
The oil marketing companies also incurred an interest payout of Rs.4,800 crore due to delay in payment of cash subsidy by the government, the official said, adding that both of these demands have not been met by the Finance Ministry.
"So in effect, the share of oil marketing companies would be the loss they incurred on sale of petrol and the interest outgo," he said, adding that the Oil Ministry had asked for Rs.49,870 crore to compensate the three firms for selling fuels at government-controlled rates, and towards interest compensation.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.