Union Government on 13 July 2015 decided to cap the subsidy payout on kerosene at 12 rupees per litre.
At present, kerosene is sold through public distribution system at 14.96 rupees per litre against the actual cost of 33.47 rupees. The difference of 18.51 rupees per litre is termed as under-recovery or revenue loss.
Now, the government has finalised the formula for meeting this under-recovery, under which the Union Finance Ministry will pay 12 rupees per litre in cash to state-owned fuel retailers from the Budget and any unbridged gap between the retail selling price and the cost of production will be borne by upstream companies.
For domestic cooking gas LPG, the government has decided to fully bear the under-recovery.
The Budget for 2015-16 has provided for 22000 crore rupees towards LPG subsidy and another 8000 crore rupees on kerosene.
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