South Asian Insider
To reduce fuel price, government looks at ONGC to share the burden
An official said ONGC’s contribution could pare the required price increase in petrol and diesel by one-third with an additional marginal relief provided by reducing the dealers’ commission by 18 paise per litre on diesel and 23 paise per litre on petrol. Wary of slipping on fiscal deficit targets, the Finance Ministry is reluctant to take a hit on excise duty levied on petrol and diesel. So, as rising fuel prices set off a political firestorm, it is the Petroleum Ministry which has stepped in. Sources have told The Indian Express that it is working on getting Oil & Natural Gas Corporation (ONGC) to take the burden. “The Ministry plans to direct ONGC to sell its crude oil at below ruling international prices by capping the price at, say, $70 for the entire fiscal year. Oil India Ltd (the other national oil producer) will not be a part of this scheme,” a government official said. ONGC supplies an estimated 20 per cent of the country’s total crude oil requirement to refining-cum-marketing companies IOC, HPCL and BPCL. The official said the exact price cap hasn’t been determined as ONGC has asked for a higher price to fund its capital expenditures for the next two years. Incidentally, ONGC and OIL last contributed to fuel subsidies in June 2015 with contributions of over 40 per cent of the annual subsidy bill. The official said that ONGC’s contribution could pare the required price increase in petrol and diesel by one-third with an additional marginal relief provided by reducing the dealers’ commission by 18 paise per litre on diesel and 23 paise per litre on petrol. ONGC’s burden sharing, to be implemented through a mechanism which is still in works, would provide close to Rs 30,000 crore for this exercise, he said. This is equivalent to a Rs 2-per litre cut in excise duty on both petrol and diesel. “The idea has been accepted in principle but the methodology and the numbers are to be worked out,” he said. Even after discount, ONGC’s net realised price on crude oil would be higher than $56 which it earned per barrel in fiscal 2017-2018. At present, the government subsidy is limited to cooking gas, LPG and kerosene with transport fuels petrol and diesel out of its ambit. The burden sharing, said the official, was being considered as the “long-term solution to address the volatility and frequent revisions in rates” which Union Law and IT Minister Ravi Shankar Prasad announced on Wednesday.
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