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Rising crude prices and populist schemes have seen the Government's subsidy bill balloon this year.
The Government may end up spending almost 90 per cent more than its Budget estimates as subsidy on fertiliser and petroleum products during 2011-12 rose, sources said.
A highly-placed source told Business Line , “The fertiliser sector is likely to get nearly Rs 7,200 crore more for the current year while the additional demand for petroleum sector is around Rs 15,000 crore.” The Finance Ministry is expected to make provisions for these amounts in the third set of demands for supplementary grants to be tabled along with the Budget, he added.
This is happening at a time when the Government is finding it extremely difficult to contain the fiscal deficit. It is yet to be seen whether additional subsidy outgo will be made from savings in other ministries or it will be fresh cash outgo, the source added.
In the second set of supplementary grants, the fertiliser sector has already been given over Rs 13,000 crore while the Finance Ministry provided Rs 30,000 crore as compensation towards estimated under recoveries to oil marketing companies on account of sale of petroleum products below cost. These are in addition to the provisions made in the Budget last year.
It may be noted that a sum of Rs 5,700 crore was re-appropriated for imported and indigenous urea by way of saving from imported P&K (phosphatic and potassic) fertiliser. This saving was possible due to lower price of nutrients for P&K fertiliser. However, this will not change the total number as payment was made from to one sub-head to another, the source explained.
Subsidy under the petroleum sector includes subsidies for domestic LPG & PDS Kerosene, freight subsidy for far flung areas, under recoveries of oil marketing companies and other related compensation. According to the Petroleum Ministry, for the fortnight beginning March 1, 2012, under recovery (difference between the cost and selling price) on a cylinder of domestic LPG is estimated at Rs 439.
On diesel, under recovery is Rs 12.04 per litre and on kerosene, Rs 28.54 per litre.
Part of the under recovery is borne by the Government and some by the upstream companies such as ONGC, Oil India and GAIL. This is in addition to a subsidy of Rs 0.82 per litre on PDS Kerosene and Rs 22.58 per cylinder on domestic LPG, provided by the Government.
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