The government will fork out oil subsidy worth Rs 8,500 crore to state-owned firms in the fourth quarter of 2018-19 for selling cooking gas and kerosene below cost.

While Rs 7,640 crore has been allocated for LPG cylinder, an amount of Rs 860 crore will be given for the under-recovery on the sale of subsidised kerosene oil, officials said.

Unlike kerosene, which is sold at a subsidised price, cooking gas is sold at market price and the subsidy amount is credited to consumers’ bank accounts by the oil marketing companies. In kerosene, the government compensates the companies for the subsidy payouts made to the consumers

Petrol and diesel have been de-controlled and are fixed by the state-owned firms depending on the price in the global market and the rupee-dollar value.

In 2018-19, the total subsidy burden on account of kerosene stood at around Rs 6,000 crore, while it was around Rs 37,200 crore for LPG compared with Rs 28,140 crore in the previous fiscal. The rise in the subsidy burden was primarily on account of higher prices of crude oil as well as the rise in the penetration of subsidised LPG connections in the country.

In the interim budget for 2019-20, the government had hiked the petroleum subsidy by about 51 per cent to Rs 37,458 crore over the revised estimate of Rs 24,833 crore. For 2018-19, the revised estimate of petroleum subsidy stood at Rs 24,833 crore against the budgeted estimate of Rs 24,933 crore.

Mongolia refinery

State-owned Engineers India Ltd (EIL) has signed an agreement to provide project management consultancy for a 1.5-million-tonne refinery coming up in Mongolia. The pact was signed with Mongol Refinery State Owned LLC.

The Mongolian government is setting up the refinery in Sainshand province, under the line of credit extended by India. India had extended $1-billion credit to Mongolia during the visit of Prime Minister Narendra Modi in 2015.