India plans to pay nearly Rs 20,000 crore to state-run fuel retailers: report

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New Delhi: India plans to pay state-run fuel traders, such as the Indian Oil Corporation, nearly 20,000 crore ($2.5 billion) to partially offset losses and control cooking gas costs, according to people familiar with the matter.

According to the people, who asked not to be identified as the talks were private, the Finance Ministry is only agreeing to a cash settlement of around Rs 20,000 crore, despite the Oil Ministry’s claim of Rs 28,000 crore. People stated that although negotiations had come a long way, no decision had yet been made.

Absorbing record global crude oil prices, the three largest state-run traders, which collectively supply more than 90% of India’s petroleum products, experienced their biggest quarterly losses in years. While the aid will reduce their suffering, it will also put an additional burden on the government’s public finances, which are already under pressure from fuel tax cuts and greater fertilizer subsidies to combat mounting inflationary pressures.

For the fiscal year ending in March, the government has allocated Rs 5,800 crore for oil subsidies and Rs 1.05 crore for fertilizer subsidies.

These oil refiners and fuel retailers have benchmarked the fuels they produce to market prices even though they use more than 85% of imported oil. This increase increased as the recovery in global demand coincided with a decline in US oil production capacity and a decrease in Russian exports.

While private companies such as Reliance Industries Ltd. Free to take advantage of stronger fuel export markets, state oil companies are required to buy crude oil at international prices and sell it domestically in a price-sensitive market.

About half of India’s LPG is imported, which is usually used as cooking fuel. According to Indian Oil Minister Hardeep Singh Puri, the retail price in Delhi on September 9 rose by 28% while the price of the Saudi contract, which is India’s LPG import standard, rose by 303% over the past two years.

The Government of India’s Ministry of Oil and Finance declined to comment.

In order to slow the inflation rate, companies, which also include Bharat Petroleum Corporation and Hindustan Petroleum Corporation, have been pressing petrol and diesel prices at the pump since early April.

According to Bharat Petroleum Chairman Arun Kumar Singh, oil companies will need some kind of intervention, either through price increases or compensating the government to cover long losses.



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