New Delhi: India's oil ministry has set interim rules that exempt state-run upstream companies from giving any discount on crude and refined fuel sales if global oil prices average up to $60 a barrel this quarter, two sources with direct knowledge of the matter said.
Oil and Natural Gas Corp, Oil India and GAIL (India) sell crude and fuels like cooking gas at discounted rates to partly compensate retailers for losses they incur on selling fuels at government set cheaper rates.
Under the new rules, which are applicable only for the three months to June and would need finance ministry approval to be extended, upstream firms will not have to pay any subsidy as long as crude prices average $60 or less, the sources said.
For prices between $60 and $100 a barrel, the companies will have to give a discount of 85 per cent of the incremental price, said the sources who declined to be named as they are not authorised to speak to media.
"The oil ministry on Wednesday informed the upstream companies about the formula that they should consider while giving subsidy to fuel retailers in April-June," one of the sources said.
Last quarter, the government had exempted ONGC, Oil India, and GAIL from paying a subsidy after a crash in global crude prices. Currently global oil prices LCOc1 are hovering at about $66 a barrel.
The oil ministry in 2014 sought the finance ministry's approval for a formula to end arbitrary decisions on the size of subsidy payments by companies like ONGC, in which the federal government wants to sell a 5 per cent stake.
On the top of the discount, state-run fuel retailers - Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum - are compensated by the finance ministry for selling cooking gas and kerosene at cheaper rates.
ONGC chairman Dinesh K Sarraf and Oil India Chairman S Sunil Kumar Srivastava did not respond to Reuters' calls seeking comments.
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