Govt may pay around $6.8bn more in fuel subsidy

India is likely to pay an additional around Rs 30,000 crore (USD 6.8 billion) than budgeted in 2011/12 to state refiners as compensation towards selling fuel at subsidised rates, a senior government official with direct knowledge of the matter said on Wednesday.

Upstream companies and explorers - Oil and Natural Gas Corp, Oil India Ltd and GAIL - have to sell crude oil and products at a discount to retailers, which sell diesel, kerosene and LPG at government-capped prices.

"The oil subsidy given in the budget has already been exhausted. So the government is working on Rs 25,000-30,000 crore (250-300 billion) more on oil subsidies to be given in the monsoon session of parliament," the source said.

The monsoon session commences on August 1.

In February, the government had budgeted a petroleum subsidy of about Rs 23,600 crore, assuming oil prices below USD 100 per barrel. However, high global crude prices are expected to substantially inflate New Delhi's oil subsidy bill.