The Centre will pay Rs 30,000 crore ($5.5 billion) to state-owned fuel retailers forced to sell at cheaper government-set rates in the first half of the year, said three sources who saw the finance ministry's confirmation letter.
The government fixes retail prices of liquefied petroleum gas, kerosene and diesel to protect the poor, leading to revenue losses at state-run Indian Oil, Bharat Petroleum and Hindustan Petroleum.
The payout by the finance ministry, nearly 46 percent less than the Rs 55,400 crore the oil ministry had been seeking, will be released after parliamentary approval is granted, the sources said.
The finance ministry pays cash subsidies to state oil retailers while state-run upstream companies - Oil and Natural Gas, Oil India and GAIL (India) - sell crude oil and associated products at a discount.
India raised the price of diesel in mid-September, after a gap of more than a year, and capped annual sales of subsidised cooking gas cylinders to six per household.
The three fuel retailers received the letter from the finance ministry on Thursday morning, the sources said.
IOC, the largest fuel retailer, will receive a government subsidy of about Rs 16,100 crore, while HPCL and BPCL's share will be about Rs 6,670 crore and Rs 7,200 crore, respectively, they said.
Copyright @ Thomson Reuters 2012
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