Oil subsidy held back to make room for PM Kisan
The ~20,000 crore that the Narendra Modi government has allocated for its newest flagship scheme, PM Kisan, for 2018-19 came at the cost of petroleum subsidy dues of the state-owned oil-marketing companies, BusinessStandard has learnt. ARUP ROYCHOUDHURY & SHINE JACOB write
The ~20,000 crore that the Narendra Modi government has allocated for its newest flagship scheme, PM Kisan, for 2018-19 came at the cost of petroleum subsidy dues of the stateowned oil-marketing companies, Business Standard has learnt.
The budgeted petroleum subsidy estimate for the current fiscal year was ~24,933 crore. Sources in multiple ministries said the Centre was seriously considering paying out an extra ~20,000 crore to clear all the outstanding subsidy dues of the OMCs and start 2019-20 on a clean slate, without any subsidy carryovers.
“The government was planning to allocate an additional ~20,000 crore for oil subsidy in the third supplementary demand for grants for 2018-19. We had that space in terms of our fiscal situation. However, when the plans for PM Kisan were being firmed up, it was decided to use that amount for the scheme instead,” said a senior official.
Had the amount been allocated for pending payments to the OMCs, the revised petroleum subsidy estimates would have jumped up to ~45,000 crore. As such, the revised oil subsidy estimate for FY19 is ~24,833 crore, almost the same as the Budgeted Estimate. The actual subsidy payout this year may even be lower than this by around ~5,000 crore, officials say. The rollover of subsidies will add additional pressure to the finances of OMCs like Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation.
Because of the spike in global crude oil prices, the Centre will face a huge petroleum subsidy burden for the current fiscal year, officials concede, which will
be rolled over, and in fact some of that rollover has already been accounted for in the next year’s subsidy Budgeted Estimate. The petroleum subsidy budgeted estimate of ~37,478 crore for 2019-20 already assumes a rollover of around ~13,000 crore.
“The idea was to start 2019-20 without any carryovers on the fuel subsidy front. The fact is now that even the budgeted subsidy allocation for next fiscal is lesser than what is actually required,” said a second official.
According to official estimates for February, expected petroleum subsidy figures for FY19 was seen at ~37,002 crore, including ~31,169 crore for liquefied petroleum gas and ~5,853 crore for kerosene. Interestingly, sources hint that allotment for the petroleum subsidy is likely to be even lesser than what was mentioned in
the Revised Estimate by interim finance minister Piyush Goyal. The year could end with only about ~16,400 crore and ~4,000 crore being allocated for LPG and kerosene, respectively.
The subsidy figures are expected to further increase by the end of March as the difference between the non-subsidised and subsidised cylinder spiked to ~205.89 a cylinder, up 24.4 per cent from ~165.47 a cylinder in the month of February. On the other hand, kerosene subsidy that was seen at ~7.08 a litre is also expected to increase in March.
Adding to the worries is another bout of spike in crude oil prices. Brent crude hit a four-month high of $68.14 a barrel on Thursday. On Friday, it was seen at $67.40 at one point, causing worry among consumers like India about the impact on their respective economies if prices cross $70.