OMCs stare at significant losses on domestic LPG sales ; Govt likely to take a fiscal hit on compensating OMCs

The Finance Ministry is likely to see a significant fiscal hit on India’s oil maths going haywire due to the war in West Asia.As things stand today, the Oil Marketing Companies are incurring under-recoveries of ₹380/domestic LPG cylinder, the Ministry of Petroleum said. According to the Ministry, this may translate into cumulative losses of approximately ₹40,484 cr by the end of May this fiscal.

Last fiscal year, the finance ministry compensated OMCs to the tune of ₹30,000 cr out of total losses of ₹60,000 cr incurred by the OMCs on the sale of subsidised domestic LPG, the Petroleum Ministry said.
Also Read: US Supreme Court to hear bid to limit birthright citizenship; Trump likely to attend proceedingsOMCs have increased the commercial LPG cylinder price for the second time since the war began but refrained from doing so for domestic LPG.

The Petroleum Ministry said, “The April 1 price increase in Commercial cylinder price is due to a 44% surge in the Saudi Contract Price: from $542/MT in March to $780/MT for April, as 20-30% of global LPG supplies are stuck in the Strait of Hormuz.”

On March 27, the finance ministry cut the excise on the sale of petrol and diesel by ₹10/litre each. This is likely to cause a net revenue loss of ₹5500 cr to the exchequer every fortnight, CBIC had said, after factoring in the revenue gain of ₹1500 cr every fortnight on the levy of export duty on ATF and diesel.

The export duties will be reviewed every 14 days.