Upstream oil and gas companies in the public sector are likely to take an additional hit of Rs 16,000 crore in the current financial year as the government has made no fresh Budgetary provision for meeting the oil subsidy burden and the state-controlled oil marketing companies have no financial cushion to absorb the impact of their under-recoveries.
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The upstream companies, such as, Oil and Natural Gas Corporation (ONGC), Oil India Limited (OIL) and GAIL, have already been asked to bail out the oil marketing companies by sharing their under-recoveries of about Rs 14,500 crore on account of petrol and diesel sales. The additional burden of Rs 16,000 crore on the upstream companies is proposed to take care of the oil marketing companies’ under-recoveries on sales of kerosene and liquefied petroleum gas (LPG).
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The total burden of under-recoveries (the gap between the government-fixed retail fuel prices and refining, marketing and other costs) on upstream oil and gas PSUs therefore will go up to Rs 30,500 crore in the current financial year. For the upstream oil and gas companies, however, this burden will not be more than last year, when they had compensated the oil marketing companies’ under-recoveries to the tune of Rs 32,943 crore. Even after taking the additional hit, these companies will remain profitable.
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Govt may shift subsidy burden to ONGC, OIL, GAIL - Business Standard