Fuel Subsidy to Reduce to Rs 75,000 Crore This Year: Oil Minister

Oil Minister Dharmendra Pradhan said in an interview to NDTV that the move to deregulate diesel prices is a "well thought decision" and the markets are appreciating it. He also said that as the world is seeing some stability in oil prices, it is the best time to make the most of this opportunity.

"With diesel becoming profitable now, total fuel subsidy is likely to reduce to Rs. 75,000 crore this year from Rs. 1,40,000 crore last year," he said. (Watch full interview)

Last Saturday, the government deregulated diesel prices which resulted in a Rs. 3.37 a litre cut in retail rate of India's most consumed fuel.

The minister said the NDA government has once again deregulated the price of diesel, a decision which was earlier reversed by the previous UPA government due to an increase in global oil prices. He also said the current government is "for the poor".

"If the international prices are falling today why should we lose this opportunity," Mr Pradhan said, adding, "In future as well the interest of the poor will be most important."

Mr Pradhan said he expects more private players along with Reliance Industries and Essar to enter the oil retail market now.

On the Direct Benefit Transfer scheme, Mr Pradhan said the previous government had "implemented it in a hurry". He also said that his government has already decided to relaunch the same for LPG from November 10 and will be linking it to the Jan Dhan Yojana - a financial inclusion scheme launched by Prime Minister Narendra Modi in August.

The government is not looking to reduce the number of subsidised cylinders from 12 but has plans to make it more targeted, he said.

He also said the government "will appeal to those who have paying capacity to buy non-subsidised cylinders".

This new scenario in the oil and gas sector will compel all to relook the issue of subsidy-sharing mechanism, he said.

"Government has already started working to restructure the subsidy sharing mechanism."

Another much awaited big reform was the gas price hike which finally came through after getting deferred again and again.

The minister said if the government had gone by the Rangarajan formula, the new price should have been around $9.45 per mmbtu, calculated in gross calorific value (GCV). "We follow NCV (net calorific value) in India and this price hike is to favour the common man. Rangarajan formula did not favour the common man... the calculation was wrong," he said.

The government is not against profitability but there should not be windfall profit. With this decision, the fertiliser subsidy will go up, but the government is expecting the gas production to go up as well, he said.

Looking at the way markets have reacted, he said the government is confident that this price hike would incentivize production. He also said all new discoveries in deep waters and high temperature waters will get a special premium after November 1.

When asked how ONGC can be made more efficient, he said the Cabinet has cleared a 10-point reform for early monetization of the hydrocarbons sector. He also said ONGC disinvestment will start now.

On the New Exploration Licensing Policy, he said NELP X will be "progressive and investment-friendly". The government plans to launch it as early as possible, he added.