BPCL cooking gas customers will continue getting subsidy post privatisation but government will not reimburse the cost

BPCL will continue to provide its customer with subsidy post privatisationBCCL
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Cooking gas customers may continue receiving subsidy into their bank accounts post privatisation of PSU oil refiner and retailer Bharat Petroleum Corporation Ltd (BPCL), with the government clarifying to potential investors that the present system would not be changed post the change of management in the company.

Sources said several potential bidders for BPCL in their query have raised the issue of subsidy on cooking gas, whether such subsidy would be borne by the new owners post the sale of government stake in the company. The government head clarified that the present system where the oil companies pay the subsidy amount and the government reimbursed such payments would continue.

Private oil companies such as Reliance, Nayara Energy do not get any subsidy support from the government for cooking gas. So if these companies were to sell domestic LPG cylinders, it would be priced at market rates.

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"The government wants to change the status of more than eight crore cooking gas subscribers with BPCL. They would continue to get subsidy post-privatisation. But since such subsidy first have to be paid by the company, the bidding parameters for BPCL would need to be reworked," said one of the potential bidders for BPCL.

The government has allocated Rs 40,915 crore as petroleum subsidy for FY-21, a six per cent increase from Rs 38,569 crore allocated for the last fiscal. Of this the allocation for LPG subsidy has been increased to Rs 37,256.21 crore for the current year. But till now in the first quarter, government had to draw nearly Rs 1,900 crore from subsidy provisions.

What concerns companies is government subsidy reimbursement which is often delayed resulting in changes in financial reporting.

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OMCs gross under-recoveries on LPG in FY-19 was Rs 31,500 crore which was nearly 73 per cent of the total amount. In FY-20, five months of LPG subsidy payments to OMCs has been rolled over.

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