PSU oil companies stare at ~4,000-cr Ujjwala loss
Recovery from PMUY beneficiaries not expected anytime soon
Indianoil, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation together are yet to recover ~3,000-4,000 crore from Pradhan Mantri Ujjwala Yojana (PMUY) beneficiaries, according to official estimates.
It is expected that these public sector oil-marketing companies (OMCS) will have to adjust this amount as customer acquisition cost, or even a loss, because their recovery is not expected anytime soon.
“The government does not intend to reimburse the oil companies,” a senior official told Business Standard.
The amount was to be recovered through budgetary subsidies on the refill of cylinders by PMUY beneficiaries.
It was earlier planned that beneficiaries would buy cylinders at the full price as long as the companies did not recover the loaned amount of around ~1,600 per connection. But PMUY beneficiaries seemed unable to bear the high cost of cylinders and did not go for refills.
This prompted the OMCS to forego the recovery of these amounts indefinitely. With no budgetary subsidy on liquefied petroleum gas (LPG), or cooking gas, being borne by the Centre, these amounts are most likely to be written off by OMCS.
Under the first leg of the PMUY, financial support of ~1,600 for each LPG connection was provided to eligible below poverty line (BPL) households. This was the component covered by a budgetary subsidy. The OMCS were to provide an interest-free loan facility for meeting the cost of the stove (also called hot plate) and the first refill. The OMCS expected this loan would be recovered from the subsidy accrued on refills.
In May 2016, when the scheme was launched, India was home to more than 240 million households, of which about 100 million were deprived of LPG as cooking fuel, according to official estimates. These families had to rely on firewood, coal, and dung cakes, among others, as a primary source of cooking.
The scheme has been a roaring success when it comes to increasing LPG coverage and over 83 million connections have been disbursed in the first leg of PMUY. According to Petroleum Minister Hardeep Puri, the country has over 300 million LPG connections in 2021.
Last-mile connectivity is on the back of the second leg of the PMUY, under which 10 million more connections were to be disbursed. The OMCS are fully bearing the cost of the first refill and stove under PMUY 2.0.
According to officials in the know, more than 10 million valid applications have been received. With this, the target for disbursing new connections in the Budget 2021 has been saturated and the ministry will be seeking post-facto approval for disbursing more.
While connection disbursements have been a success, the price of a domestic (14.2 kg) cooking gas cylinders has been a matter of concern. The price was hiked by ~15 apiece on Wednesday. After the price revision, a domestic cylinder now costs ~899.50 in Delhi. A similar price revision was implemented across the country.
Due to global pressure, OMCS are moderating the price of cooking gas to maintain affordability, harking back to the days when they were bearing the subsidies for petroleum products. According to executives, Indianoil, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation are holding back liquefied petroleum gas (LPG) price hikes by around ~100 for a domestic cylinder.
The price of a commercial (19 kg) LPG cylinder was hiked earlier this month by ~43, taking its cost to ~1,736 apiece.
]Prices of LPG, petrol, and diesel have been going up due to global cues such as the sustained tightening of crude oil supplies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies.