However, to maintain prices at current levels, there is a need for the continuation of the petrol subsidies which were otherwise due to be phased out. This would mean an extra Rs 6,000 crores burden on the public oil sector companies, something the companies are not - understandably - too keen on.
Hence, a compromise solution - India's Petroleum Ministry wants the government and the public sector oil companies to share the subsidies burden together.
India's Petroleum Ministry will be looking for Cabinet approval for a plan to divide LNG and kerosene subsides between the exchequer and the public sector oil companies.
If the plan is given the green light, the upstream companies - Oil and Natural Gas Corp and the Gas Authority of India Ltd - will share one-third of the subsidy. Another one-third will be borne by oil marketing companies Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd. The remaining one-third will be the Government's responsibility.
The subsidy was to be phased out this year but plans to do so have been halted due to the upcoming elections and, with Petroleum Minister Ram Naik reluctant to raise prices, it was only logical that the subsidy - which hit Rs 4,500 crores last year and is expected to be around Rs 6,300 crores this year - stays. An earlier plan to revert to the pre-liberalisation oil pool account system was viewed as unfeasible by India's Finance Ministry.
