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Business Standard (India): Shell, Caltex move govt on LPG subsidy

Business Standard (India): Shell, Caltex move govt on LPG subsidy

Monica Gupta & Sidhartha /New Delhi

September 06, 2004

Multinationals Shell, Caltex and SHV Energy have petitioned the government to provide them subsidy on liquefied petroleum gas sold by them in India.

This has prompted the petroleum ministry to approach the finance ministry for passing the subsidy on cooking gas to the private players as well.

At present, the government provides a subsidy of around Rs 25 for every cylinder of cooking gas sold to households.

“We have sought the finance ministry’s clearance for passing on the benefits to the private players,” a petroleum ministry official said.

At a meeting of the Foreign Investment Implementation Authority on August 20, SHV Energy and Shell Gas & Power had raised the issue of subsidy with the government.

For instance, SHV Energy said they had invested around Rs 300 crore in the LPG marketing since the market was opened to private players in 1993. But 95 per cent of the market was not available to multinationals due to the subsidy extended to the public sector.

Multinationals demanded that the subsidy should either be withdrawn or the benefit should also be made available to them. Shell has demanded that a decision be taken at the earliest.

“The government had earlier considered phasing out of the subsidies. But since the withdrawal of the subsidy has social implications, the government is examining the issue of extending the subsidy to the private sector,” an official said.

Officials, however, said the government did not propose to increase the subsidy bill for kerosene sold through the public distribution system or cooking gas sold to households.

“The only change required will be to make the private player eligible to get the benefit. This may mean that public sector companies will get lower refunds,” an official added.

The government has provided Rs 3,500 crore during the current fiscal for kerosene and cooking gas. As per a formula worked out by the petroleum ministry last year, the subsidy bill is shared equally between the upstream and downstream oil companies and the government.

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