India’s government approved a plan to pay about Rs220 billion ($2.7 billion) to state-run fuel retailers, such as Indian Oil Corp, to partly compensate them for losses and keep a check on cooking gas prices.
The one-time grant has been approved by the cabinet for oil marketing companies, Information and Broadcasting Minister Anurag Thakur told reporters at a briefing on Wednesday.
The decision comes after the oil ministry sought a cash payout for the companies that suffered the worst quarterly losses in years by absorbing record international crude prices. Bloomberg News reported last month that the talks were at an advanced stage.
The handout will ease the pain of the refining-cum-fuel retailing companies, but add pressure to the government’s coffers that are already strained by tax cuts on fuels and a higher fertilizer subsidy amid mounting inflationary pressures.
The government has earmarked an oil subsidy of Rs58 billion for the fiscal year ending March, while the fertilizer subsidy has been pegged at Rs1.05 trillion.
India imports about half of its liquefied petroleum gas, generally used as cooking fuel. The Saudi contract price, the import benchmark for LPG in India, had increased 303 per cent in the past two years, while the retail price in Delhi increased by less than a tenth of that, India’s Oil Minister Hardeep Singh Puri said on September 9.
