Indian upstream players face subsidy pain

In India, the state run companies set the majority of fuel prices. There are, however, a few products, such as liquefied petroleum gas, kerosene and diesel that have their prices specifically controlled by the Indian government in order to ensure that the poor can afford fuel.

This has led to Indian state run companies having to run at a loss - a deficit that runs into the billions of dollars. At present the total subsidy ‘bill’ amounts to 368.94 billion Rs, or US$ 7.6 billion, approximately 38% of the total deficit.

This has lead to complaints from major players in the region, such as ONGC, which attributed a 5% decline in its profits to the burden of the subsidy. The company’s actual profit for the year was 67.41 billion Rs, or US$ 1.4 billion, some way below the 70.83 billion Rs of the previous quarter and even further below the estimated 72.6 billion Rs.

Published on 09/02/2012

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