As per a new fuel subsidy sharing formula approved last year, upstream firms Oil and Natural Gas Corp (ONGC) and OIL have to make good any revenue loss incurred by fuel retailers on selling kerosene through PDS and domestic LPG after taking into account the fixed subsidy provided by the government.

For the October-December period, retailers Indian Oil Corp (IOC), Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL) lost Rs 6,149 crore in revenue on selling kerosene and LPG at government fixed retail price.

Of this, the government as per the agreed formula was to pay a subsidy of Rs 12 per litre on kerosene and Rs 18 per kg on LPG. The unmet revenue loss after accounting for this subsidy was coming to close to Rs 300 crore, official sources said.

The government has decided to bear this loss as well and pay all of the Rs 3,279 crore subsidy on LPG and Rs 2,870 crore on kerosene for the quarter, they said.

Kerosene through public distribution system (PDS) is sold at Rs 14.96 per litre while a 14.2-kg LPG cylinder costs Rs 419.22 in Delhi, both of which are way below their cost.

Sources said at present the state-run fuel retailers incur under-recoveries or revenue loss on sale of PDS kerosene and subsidised domestic LPG only as petrol and diesel have been deregulated (market-linked) with effect from June 2010 and October 2014, respectively.

For 2015-16, "the government has approved budgetary support for PDS kerosene under-recovery at a rate of Rs 12 per litre and the remaining under-recovery will be borne by the upstream companies.

"The government has approved a fixed subsidy of Rs 18 per kg under the Direct Benefit Transfer for domestic LPG," a source said.