Saturday, June 25, 2022

Cooking gas subsidy will continue post BPCL privatisation: Centre

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  • The DIPAM has clarified to bidders that the present system of subsidy at BPCL for cooking gas will remain unchanged after the change of management in the company

  • Under the present system, the oil marketing companies pay the subsidy amount and the government reimburses these payments

New Delhi: The government has told potential bidders that the subsidy on cooking gas will continue even after the privatisation of fuel refiner and retailer Bharat Petroleum Corporation Ltd (BPCL). The response was shared as part of a set of clarifications released by the Department of Investment and Public Asset Management (DIPAM) for queries posed by bidders. The DIPAM has clarified to bidders that the present system of subsidy at BPCL for cooking gas will remain unchanged after the change of management in the company.

Several bidders had sought to know whether the subsidy on cooking gas would be borne by the new owners after privatisation. Under the present system, the oil marketing companies pay the subsidy amount and the government reimburses these payments.

Govt amends PIM for BPCL disinvestment

The Centre introduced amendments to the preliminary information memorandum for BPCL sale, along with releasing clarifications to bidders queries on September 4. DIPAM has said that all interested entities shall be required to incorporate an investment vehicle or an SPV or at any time after the submission of the expression of interest (EoI) but prior to the signing of the sale purchase agreement (SPA).

Also read: BPCL disinvestment: Govt amends PIM, allows bidders to create SPV after EoI submission

The backdrop

Sources who spoke to PSU Watch on the condition of anonymity said that the reimbursement of cooking gas subsidies by the Centre are often delayed, which result in changes in financial results. In FY2018-19, OMCs’ gross under-recoveries on LPG stood at Rs 31,500 crore, which was nearly 73 percent of the total amount. For FY2019-20, only five months’ reimbursement has been rolled out to OMCs. For FY2020-21, the government has allocated Rs 40,915 crore as petroleum subsidy, up from Rs 38,569 crore allocated in FY2019-20. However, at the end of the first quarter, the government had withdrawn Rs 1,900 crore from subsidy provisions. Since the margin on cooking gas is wafer thin, it is difficult to make the service financially viable without subsidies.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Telegram. Join PSU Watch Channel in your Telegram and stay updated)

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