IGI Logo

Sell-off bound Bharat Petroleum Corporation Ltd (BPCL) has created a separate platform for its cooking gas operations that runs government's subsidised LPG cylinder scheme where subsidy amount is transferred directly into the accounts of consumers.

Creation of separate platform was mandated as part of the sell-off process to ring fence the new owners from this subsidy scheme that could function uninterrupted with government transferring subsidy to consumers even after privatisation of the BPCL.

The government is selling its entire 52.97 per cent shareholding in BPCL to a strategic investor. There were doubts among potential bidders how the subsidised cooking gas scheme would be run post the management of BPCL getting transferred to new private sector owners. If companies were to take the tab of subsidy, it would alter the valuation of BPCL.

It has now been decided that cooking gas customers will continue receiving subsidy into their bank accounts post privatisation of PSU oil refiner. The government has clarified that the present system where the oil companies pay the subsidy amount and the government reimbursed such payments would continue.

Creation of a separate platform would help keep subsidised cooking gas operation separate. This will allow identification of beneficiaries and transfer of subsidy without the scheme creating confusion for new owners.

The LPG price for cooking for consumers under PAHAL is subsidized by the government wherein the subsidy quantum given to the PAHAL (Pratyaksha Hastaantarit Laabh) consumers by way of DBT, is the difference between the market-determined price and the subsidized price.

Private oil companies such as Reliance, Nayara Energy do not get any subsidy support from the government for cooking gas. So if these companies were to sell domestic LPG cylinders, it would be priced at market rates.

The government has allocated Rs 12,995 crore as petroleum subsidy for FY-22, a drastic cut over Rs 40,000 crore provided in the previous year.

With regard to BPCL, the government hopes to invite price bids from prospective investors soon. Besides Vedanta Group, two American funds - Apollo Global and I Squared Capital - have submitted their expressions of interest (EoI) for BPCL.