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India planning new rules for oil subsidies

NEW DELHI, May 23, 2015

India plans to reform rules governing the level of discounts upstream state oil firms including Oil and Natural Gas Corporation (ONGC) offer to retailers, a senior finance ministry official said yesterday, a move that could expedite the sale of a stake in the company.

The government hopes to sell shares in ONGC and Indian Oil Corporation to raise about a third of its budget target for asset sales of $11 billion '“ and reduce its fiscal deficit to 3.9 per cent of GDP in the 2015/16 fiscal year.

Currently ONGC, Oil India and Gas Authority of India Limited sell crude and fuels like cooking gas at discounted rates to partly compensate retailers for losses they incur on selling fuels at government-set rates.

But the finance ministry and oil ministry are in talks to work out a mechanism for easing the subsidy burden for the upstream companies, Ratan P Watal, expenditure secretary at the Ministry of Finance, said yesterday.

Earlier, sources told Reuters that the oil ministry had set a new subsidy formula for the April-June quarter that would exempt upstream companies from discounting sales of crude oil and refined products if global oil prices are up to $60 per barrel.

India had to defer plans to sell a 5pc stake in state-run oil company ONGC last year as investors wanted a clarity on subsidy payments, which had previously been set by government decree, creating uncertainty around its earnings outlook.

Finance Minister Arun Jaitley gave a bullish view on asset sales, telling a news conference called to mark Prime Minister Narendra Modi's first year in power that deals worth Rs500 billion ($7.9 billion) were 'in the pipeline'.-Reuters




Tags: India | oil subsidy |

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