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Reason behind Subsiding Subsidies

Subsidies to the listed companies in FY14 and FY15 have fallen for the first time in the last five years and thrice in the last one decade

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The government spends huge sums on subsidies, which has raised its fiscal deficit over the years. Going by subsidy grants to all the companies, records show that the subsidy amount has risen by a huge 30 per cent CAGR over the last ten years. In FY14 total subsidy rose to a high of R2,54,632 crore. But the silver lining is that the subsidies to the listed companies have fallen for the first time in the last five years in FY14 and have further gone down in FY15.

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This is because subsidies given to oil marketing companies, which suck in the biggest chunk of subsidies, have come down. In the first three quarters of FY15, oil marketing companies have not only witnessed a fall in subsidies but also seen fall in the discounts they get from crude-drilling companies like ONGC, Oil India, GAIL and Chennai Petroleum. This has not only reduced the government's burden but has also reduced the burden of the crude-drilling companies and hence will improve their margins. Two reasons behind fall in subsidies to oil-marketing companies are deregulation of diesel prices last year and fall in the international prices of crude oil from a high of $115 in June, 2014, to around $50 per barrel now.

Reason behind Subsiding Subsidies

Top ten companies getting highest subsidies (Rcr)

Company nameIndustryFY14FY13FY12
Indian OilRefineries389595506147306
Hindustan PetroleumRefineries158512562719120
Bharat PetroleumRefineries190142253420336
National FertilizersFertilisers604850205363
Rashtriya Chemicals & FertilizersFertilisers327130412928
Coromandel InternationalFertilisers285929714746
E.I.D. ParrySugar285929714746
Tata ChemicalsFertilisers242924112841
Madras FertilizersFertilisers223519261891
Southern PetrochemicalFertilisers-17812055

Subsidies (Rcr) to oil-marketing companies

Company nameBudgetry support
Apr-Dec 14 Apr-Dec 13
Discounts from ONGC/OIL/GAIL/CPCL
Apr-Dec 14 Apr-Dec 13
Indian Oil12027186782332125047
Hindustan Petroleum50588277980711100
Bharat Petroleum50008817969411824

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