From June, 2020, the Union Government stopped depositing LPG (liquefied petroleum gas) subsidy in the accounts of eligible beneficiaries and the position continues till date. Even as the budget for 2021-22 has provided for Rs 14,000 crore under this head (down from Rs 36,000 crore during 2020-21), it is unlikely that any payments will be made during the current year. What has prompted this move? Was it orchestrated but put into effect only now? To understand, let us reflect on some basic facts. Since January 1, 2015, Modi – Government has been running a scheme for direct benefit transfer (DBT) of LPG. Nicknamed PAHAL (Pratyaksha Hastaantarit Laabh), under it, three major oil marketing PSUs viz. Indian Oil Corporation Limited (IOCL),...
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Category: Oil Pool Account (OPA)
Stop routing oil subsidy via PSUs
A request submitted by Reliance Industries Limited [RIL] to the government allowing it to deal in marketing and distribution of ‘subsidized’ LPG [liquefied petroleum gas] draws attention to a very crucial aspect of reforms that holds the key to supplying oil products at low cost on sustainable basis. This relates to breaking the monopoly of public sector undertakings [PSUs] in the downstream oil sector by letting players from private sector in. At present, infrastructure, storage, handling [and other logistics], marketing and distribution of petrol, diesel, LPG, kerosene etc is dominated by oil PSUs viz., Indian Oil Corporation Limited [IOCL], Bharat Petroleum Corporation Limited [BPCL] and Hindustan Petroleum Corporation Limited [HPCL]. 2 fundamental factors have contributed to their predominance. First, relates...
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OIL ECONOMICS AND POLITICS
The BJP must now stop the practice of asking oil companies to give discounts to downstream PSUs Presenting his first maiden Budget in July 2014, Union Minister for Finance Arun Jaitley had accepted the daunting challenge to retain the fiscal deficit target for 2014-15 at 4.1 per cent. On February 28, while presenting the Budget for 2015-16, he reported that the target had been achieved. However, this achievement was at the cost of massive reduction in plan expenditure from the Budget estimate of Rs5,75,000 crore to about Rs4,68,000 crore as per revised estimate, a fall of Rs1,07,000 crore. For this, one cannot blame the present Government as ,when it came to power, it had inherited a weak economy which resulted in...
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ONGC – no more ‘milching’ please
Presenting his first maiden budget in July 2014, finance minister Arun Jaitely had accepted a daunting challenge of 4.1% fiscal deficit for 2014-15. On February 28, 2015, while presenting budget for 2015-16, Jaitely reported that the target had been achieved. The achievement was at the cost of massive reduction in plan expenditure from budget estimate (BE) of Rs 575,000 crore to about Rs 468,000 crore as per revised estimate (RE), a fall of Rs 107,000 crore. For this, one can’t fault present government as it inherited a weak economy which resulted in equally massive drop in tax receipts from about Rs13,64,000 crore (BE) to Rs 1251,000 crores (RE), a fall of Rs 113,000 crores. During the last 9 months of...
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A crude anti-reforms attitude
Unkind burden And illogical too jorgen mcleman / shutterstock.com The Gujarat government’s efforts to squeeze out more royalty from ONGC could impact production and exploration The Modi government is keen to take up administrative and judicial reforms in a big way, but the actions of the Gujarat government may become a stumbling block. A case in point is the Gujarat government’s decision to collect a royalty of 20 per cent on the discount given by the Oil and Natural Gas Corporation (ONGC) on sale of crude to downstream oil PSUs. It stands to reason that royalty or cess should be levied on the sale price (after discount), as has been established by precedent as well. However, the Gujarat government’s...
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ONGC resources eroded by un-warranted levy and subsidy sharing
At a time, when Modi dispensation at the centre has pledged to take up administrative and judicial reforms in a big way, it is confronted with a legacy where actions of none other than Gujarat government may be becoming a stumbling block. A case in point is latter’s decision to collect royalty of 20% on discount given by Oil and Natural Gas Corporation (ONGC) on sale of crude to downstream oil PSUs. The decision was upheld by Gujarat High Court (GHC) which on Nov 30, 2013 ordered ONGC to pay dues of around Rs 10,000 crore retrospectively from April, 2008. ONGC challenged GHC order in Supreme Court (SC). On February 13, 2014, SC stayed GHC’s order but directed ONGC to...
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One step forward, two steps back
If raising the cap on subsidised LPG cylinders was bad enough, withdrawing Aadhaar linked payouts was disastrous The UPA Government is prone to talking loud on economic reforms. Yet, it is reluctant to take hard decisions. The government committed two blunders recently: it backtracked on the LPG subsidy reduction and — what’s worse — withdrew the direct benefit transfer (DBT) scheme. By doing so, the government has let go an opportunity to prune massive leakages in food, fertiliser and LPG subsidies and bring about a much-needed fiscal correction. Let us first look LPG subsidies. Flip-flops all along Prior to 2002-03, sale of LPG (besides diesel and kerosene) was subsidised under an administered pricing regime. This was paid for by higher...
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A crude demand for royalty
SUMMARY The subsidy ONGC gets on crude sales to downstream oil PSUs is not a part of its sales realisation and, hence, Gujarat’s demand for high royalty is illogical While administrative and judicial bodies are expected to aid the process of economic reforms, they sometimes tend to obstruct the smooth conduct of business. A case in point is the decision of Gujarat government to collect a royalty of 20% on the discount given by Oil and Natural Gas corporation (ONGC)—an upstream central oil & gas PSU—on the sale of crude to downstream oil PSUs. The decision has been upheld by the Gujarat High Court, which has ordered ONGC to pay dues worth R5,000–6,000 crore retrospectively from 2008. ONGC is already...
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