Rating agency ICRA on Wednesday said the government decision to hike retail prices of subsidised kerosene by 25 paise every month will help cut down the gross under recoveries on the fuel by ?7.60 billion in 2016-17. The impact of the move on the exchequer would be even more in 2017-18, when it would help lower the gross under recoveries on kerosene by ?20.40 billion. “The upstream companies would be major beneficiaries of the reform especially at current or higher level of crude oil prices,” it said. As per existing under-recovery sharing formula, the government bears kerosene subsidy up to ?12 per litre, while the balance is borne by the PSU upstream companies – ONGC and Oil India Ltd.
In the first such move in five years, retail prices of subsidised kerosene were hiked by 25 basis points on July 1. It followed a government decision to allow state-owned oil companies to raise the price of kerosene by 25 paise a litre each month for 10 months to cut the subsidy burden. Kerosene subsidy is estimated at about ?120 billion in the current fiscal, if global crude oil prices remain within the $40 to $50 per barrel. In 2015-16, kerosene accounted for 41.7 per cent of the total petroleum subsidy of ?275.71 billion. According to the Ministry of Petroleum and Natural Gas, the under recoveries on subsidised kerosene is estimated at ?13.12 per litre in July as against ?11.73 last month. Ryan Spooner Authentic JerseyShare This