IOC not paid Bhutan fuel subsidy since Jan; restores supply

State-owned Indian Oil Corp (IOC) today restored supply of subsidised cooking gas (LPG) and kerosene to Bhutan after a month long hiatus.

India sells LPG, kerosene and diesel to Bhutan at subsidised rates. While the difference between the selling price and actual cost on diesel is made good from the Budget, the subsidy on LPG and kerosene is paid by Ministry of External Affairs (MEA).
IOC, which is the sole supplier of LPG and kerosene to Bhutan, had stopped selling the two fuels at concessional rates from July 1 after it was told that the MEA subsidy will no longer be available.

The company got a communication from the Oil Ministry yesterday asking it to restore the subsidy on kerosene and LPG supplies to Bhutan from August 1, an official said here.
The communique quoted a July 25 letter from the MEA that referred to consultations with Royal Government of Bhutan and the subsequent decision to "restore with effect from August 1, the subsidy on supply of kerosene and LPG by IOC to Bhutan as exiting before July 1, 2013."

"We are acting in accordance with the instructions and the next batch of LPG and kerosene that will go from our West Bengal and Assam supply points will be priced at subsidised rates," he said.

The official said while supply of subsidised LPG and kerosene to Bhutan had stopped from July 1, sale of diesel at concessional rates had continued as before.
"In fact, we have not been paid LPG and kerosene subsidy since January," the official said.

Normally, subsidy is released at the end of the quarter and about Rs 30 crore towards LPG and kerosene subsidy for January-March quarter had not been paid. A similar amount would be due for the subsequent quarter.

IOC sold 7,312 tons of LPG and 4,311 tons of kerosene to Bhutan in 2012-13. In April-June, it sold 1,791 tons of LPG and 763 tons of kerosene.

While is the sole supplier of LPG and kerosene to Bhutan, diesel sales are also made by Bharat Petroleum Corp Ltd (BPCL). Of the 103,003 tons of diesel supplied in 2012-13, 60,409 tons came from BPCL and 42,594 tons was done by IOC.

In Q1, BPCL supplied 15,571 tons of diesel and IOC 11,591 tons. The official said the difference between the LPG and kerosene cost price and billed rate to Bhutan dealers is paid by MEA.

In case of diesel, the difference is claimed by IOC in the overall subsidy from the general budget. Total subsidy claimed on export of diesel to Bhutan was Rs 140.34 crore in 2012-13 and Rs 17 crore in Q1 of the current fiscal.