Government hikes upstream oil companies' subsidy burden on fuel to 38.8%

In a move that may spook Oil and Natural Gas Corp's (ONGC) planned public offering, the government has hiked the contribution of upstream oil companies toward fuel subsidies to 38.8 per cent for 2010-11 fiscal.

Traditionally, upstream companies made up roughly one-third (33 per cent) of the revenues lost on fuel sales through discounts on crude oil and products they sold to Indian Oil, Hindustan Petroleum and Bharat petroleum

But the oil ministry yesterday issued orders raising the upstream contribution to 38.5 per cent, they said, adding that ONGC has been ordered to chip in Rs 24,892.43 crore, while OIL India will provide Rs 3,293 crore and GAIL Rs 2,111.24 crore.

he government had planned to sell 5 per cent of its shares in ONGC in a follow-on public offering (FPO) in July to raise Rs 12,000 crore, but at the current price, it may get just over Rs 10,000 crore.