In a bid to providing relief to the domestic oil retailers, who have incurred heavy losses in the past quarter, the Indian government is planning to pay a compensation of Rs 20,000 crore The domestic oil retailers incurred heavy losses as they absorb the soaring crude oil prices in the international market.
As per a report by Bloomberg, the finance ministry has decided to pay Rs 20,000 crore in cash, as against Rs 28,000 crore sought by the oil ministry. The three domestic oil retailers namely Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited contribute 90 per cent to India’s crude oil demand. These oil retailers reported the worst quarterly results this year, while facing the double whammy of inflation, tax cuts on fuel, and a higher subsidizer subsidy.
According to the report, the government had set aside an oil subsidy worth Rs 5,800 crore, whereas a fertilizer subsidy worth Rs 1.05 trillion for the fiscal year ending March. While the state-run oil retailers buy fuel at international prices, they sell locally at the price-sensitive market. Compared to this, private players such as Reliance Industries and Nayara Energy have the flexibility to export fuel in stronger markets.
Notably, despite the soaring crude oil and liquified petroleum gas (LPG) prices in the international market, the petrol, diesel and LPG prices in India continue to remain unchanged for the past several months. Last week, oil minister Hardeep Singh Puri informed that the price of Saudi contract prices, which is an important benchmark of LPG in India surged as much as 303 per cent in the past two years, while the LPG retail price was increased by 28 per cent.
