India Plans To Pay $2.5 Billion to State-Run Fuel Retailers Hit by Oil Costs: Report

India plans to pay $2.5 billion to the state-run fuel retailers to partly compensate for losses and keep a check on cooking gas prices.

India plans to pay about Rs 200 billion ($2.5 billion) to the state-run fuel retailers, such as Indian Oil Corp., to partly compensate them for losses and keep a check on cooking gas prices, according to people familiar with the matter.

The oil ministry has sought a compensation of 280 billion rupees, but the finance ministry is agreeing to only about a 200 billion cash payout, the people said, asking not to be identified as the discussions are private. The talks are at an advanced stage but a final decision is yet to be taken, the people said.

The three biggest state-run retailers, which together supply more than 90 per cent of India's petroleum fuels, have suffered the worst quarterly losses in years by absorbing record international crude prices.

While the handout could ease their pain, it would add pressure to the government's coffers that are already strained by tax cuts on fuels and a higher fertilizer subsidy to tackle mounting inflationary pressures.