India's fuel subsidy rises to US$69.6 billion

Indias fuel subsidy bill could balloon to Rs300,000 crore (US$69.6 billion) this year. The petroleum ministry earlier had estimated the fuel subsidy at Rs245,000 crore (US$56.9 billion) on the assumption that the price of the basket of crude oil that Indian refiners buy would average US$123 per barrel. “Given the rate at which oil prices are increasing, it may be just a couple of months before the annual under-realization touches Rs 300,000 crore (US$69.6 billion),” said a senior official of state-owned Indian Oil Corporation (IOC), which sells half the fuels the country consumes. The retail price hike and the duty cuts announced on June 4 had tempered the subsidy burden by about Rs40,000 crore (US$9.3 billion) but “the positive impact of the fuel price increase and duty cut will possibly be wiped out next month when the numbers are redone,” said the IOC official. (June 28, 2008)