INDIA BUSINESS WORLD - MARCH 2006
THE MONTH THAT WAS

RIL, ONGC & GAIL NOT TO GET LPG RETAIL RIGHTS

THE government has decided not to give LPG marketing rights to Reliance Industries, ONGC and GAIL, in view of the current market scenario where products are being sold at heavily subsidised prices.

The option for the government was to either allow them to sell only to non-PDS customers at market rates or to bring them into the existing system where they sell the products at subsidised rates. Senior government officials said it would be difficult to manage more players in this subsidy scheme as it meant doling out subsidies to more companies. The option of allowing them to sell at market rates, primarily to industrial consumers, too was struck down at this stage as it would go against the oil marketing companies, which are bearing huge losses on the sale of cooking fuels. The subsidy bill for cooking fuel was set to be a staggering Rs 26,000 crore this fiscal.

“The system of meeting the subsidy bill is already in a mess with the government and upstream oil companies coughing up huge sums to reduce the losses of the oil marketing companies. Adding more players to this system does not make much sense,” a senior official said. While companies like ONGC have doled out almost Rs 12,000 crore towards the subsidy bill, the government itself had to offer oil bonds of over Rs 11,000 crore to meet this shortfall.