The government on Thursday approved Rs 20,001 crore in additional cash subsidy to State-owned oil companies to compensate them for selling fuel below cost in 2010-11 fiscal.

With this, the government has paid a total of Rs 40,912 crore in subsidy to oil companies in 2010-11 financial year, an oil ministry official said here.

“The finance ministry today issued letter giving Rs 11,027 crore in cash compensation to Indian Oil Corp (IOC), Rs 4,595 crore to Bharat Petroleum (BPCL) and Rs 4,379 crore to Hindustan Petroleum,” the official said.

In two previous installments government had given Rs 20,911 crore to make up for part of the revenues oil companies lost on selling diesel, domestic LPG and kerosene below cost.

The cash subsidy payout is more than half of the over Rs 78,000 crore that the three firms lost on selling auto and cooking fuel below their imported cost in 2010-11 fiscal.

Upstream firms like Oil and Natural Gas Corp (ONGC) will chip in about Rs 25,750 crore, leaving the fuel retailing firms to fed over Rs 11,000 crore of revenue losses by themselves.

The official said fuel retailers were demanding Rs 30,000 crore in cash compensation but finance ministry gave only Rs 20,001 crore on Thursday.

While, petrol price was freed from the government control in June, State oil firms continue to sell diesel, domestic LPG and kerosene at government ruled prices, which is substantially lower than cost of production.

IOC, BPCL and HPCL currently lose Rs 18.19 per litre on diesel, Rs 29.69 per litre on kerosene and Rs 329.73 per 14.2-kg LPG cylinder.

In the 2010-11 fiscal, the three firms lost Rs 78,202 crore, but the government has provided only Rs 40,912 crore in compensation. The oil marketing firms lost Rs 2,227 crore on selling petrol below imported cost during April and June before its price was freed from the government control.

They lost Rs 34,384 crore on sale of diesel, Rs 19,566 crore on PDS kerosene and Rs 22,025 crore on sale of domestic LPG.

The official said at current prices, the total revenue loss in current fiscal is estimated at Rs 180,208 crore.

A fuel price hike is on cards to contain the revenue loss.