India is anticipated to save lots of ₹35,758 crore on kerosene and cooking fuel subsidies this yr, which is over 91% of the full budgeted gasoline subsidy for 2020-21, primarily due to low worldwide oil costs, in response to two officers who requested to not be named.
As per prevailing worldwide costs, the anticipated subsidy on kerosene offered by the general public distribution system within the present monetary yr is zero. The subsidy by direct profit switch (DBT) of cooking fuel, or liquefied petroleum fuel (LPG), is anticipated to be Rs 3,506 crore in 2020-21, considerably decrease than the budgeted quantity of Rs 35,605 crore, these officers added.
The Union Funds for 2020-21 gives for Rs 39,264 crore subsidies for the 2 fuels (Rs 35,605 crore on LPG subsidy and Rs 3,659 crore on kerosene) in comparison with Rs 34,110 crore within the earlier fiscal yr, one of many officers mentioned.
In response to the petroleum ministry’s information, common value of India’s crude oil import (Indian basket) in April 2020 plunged sharply by about 72% at $19.9 per barrel in comparison with $71 a barrel in the identical month final yr. (See chart).
Though international oil costs rose after oil producers’ cartel resorted to an output lower, India’s import value nonetheless stays underneath $45 a barrel, the officers mentioned. In response to petroleum ministry’s datakeeper, the Petroleum Planning and Evaluation Cell (PPAC), India’s common value of crude import in July was $43.35 per barrel, which is about 32% decrease than the speed prevailing a yr in the past.
“A portion of this financial savings might be adjusted in opposition to the pending payments of OMCs [oil marketing companies,” the first official, working in the petroleum ministry, said without elaborating on the pending bills. Cooking gas subsidy is directly credited in advance to more than 80 million beneficiaries’ bank accounts by state-run OMCs and the government reimburse the money next month.
The second official said a portion of this money will be used to fund supplies of free cooking gas cylinders for three months to nearly 80 million Covid-19 affected poor households as part of the government’s Rs 20 lakh crore ‘Atmanirbhar Bharat Abhiyan’ (Self-reliant India initiative) package.
The Rs 20 lakh crore economic stimulus-cum-relief package, announced between March 26 and May 17, included distribution of three free cooking gas cylinders to the poor till June. Those households that could not utilise their quota of three free gas cylinders till June can avail the facility till September 30, the second official said. The official said while budgeted fuel subsidy has gone down by over Rs 35,000 crore, the government factored in an expenditure of about Rs 12,800 crore on three free gas cylinders to 80 million households for three months.
Divakar Vijayasarathy, founder and managing partner of consultancy firm DVS Advisors LLP said, “Thanks to global economic slowdown and Covid-19, the market prices of oil has flattened out and is bearish thereby leading to lower market prices of LPG.” Benchmark Brent crude slipped 1.53% to close at $44.4 a barrel on Friday (August 7).
Vijayasarathy said international oil prices are expected to remain subdued due to lower demand as storage tanks across the globe are full to the brim.