Lack of clarity on subsidy burden sharing compels public sector oil explorer ONGC to defer its board meeting, which was scheduled to consider third quarter financial results, by two days to February 14.

Uncertainty on the subsidy sharing formula has been one of the key factors for the government to push back ONGC divestment, though the Centre maintains that it will take place this fiscal.

The company was in a fix on how to close its accounts, as it had not received any communication from the government on subsidy sharing till Wednesday evening.

Rare conundrum

“This is a rare situation where a company wants to know how much it has to give, rather than how much it will get,” an official in the know of the development said.

ONGC, along with Oil India and GAIL, as part of the government’s subsidy sharing mechanism, extend discounts to public sector oil retailers for selling petroleum products below market price. The subsidy burden is shared by government through financial assistance, upstream companies by way of discounts and oil retailers themselves.

The total revenue loss (under-recovery) incurred by oil retailers in the third quarter is estimated to be ₹15,000-16,000 crore. The under-recoveries from April to December 2014-15 has been ₹67,091 crore.

Lower revenue loss likely

The revenue loss on sale of petroleum products is expected to be lower than the earlier estimates because of drop in international crude oil prices. But, the drop in prices has put ONGC in a strange paradox, as the country’s major oil producer, for the first time, finds that the discount it has to give on its produce is higher than the actual oil price.

ONGC has to give a discount of $56 a barrel to the public sector buyers as part of government’s subsidy sharing mechanism.