ONGC,GAIL FY 2011-2012 Subsidy Sharing

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Upstream oil companies like ONGC, Oil india Limited and GAIL bear one-third of the revenue that retailers lose on selling diesel, domestic LPG and Kerosene at government-controlled rates. A similar amount is contributed by the government by way of cash subsidy while the rest is either absorbed by the retailers or passed on to consumers.
The estimated revenue loss to the government prior to June fuel price hike and duty cuts is Rs. 1.71 lakh crores. Post duty rejig and a Rs 3 per litre hike in diesel, Rs 2 per litre increase in kerosene and Rs 50 per cylinder hike in domestic LPG rates, the revenue loss now is estimated at Rs 1.14 lakh crore.  
The government has taken a hit of Rs 49,000 crore by way of cut in customs duty on crude oil and petroleum products, and reduction in excise duty on diesel. Hence instead of calculating the subsidy share burden on 1.14 lakh crore the government wants subsidy sharing on 1.71 lakh crore.
With this calculation the share of upstream oil companies would be Rs. 56,707 crores instead of Rs. 38,024. The ONGC share of this subsidy bill will go upto Rs. 47, 640 crores this fiscal (FY-12) against the estimated Rs 31,943.5 crore post duty cuts in June this year.

ONGC in FY-11 provided Rs 24,892 crore fuel subsidy.

The source based news if materialises would be a huge dampener to the stock in near term and could impact its FPO plan further.

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