Finance ministry sanctions additional Rs15,000 crore fuel subsidy

The additional compensation sanctioned on 11th November is over and above the Rs15,000 crore sanctioned for meeting losses of first quarter ending 30th June, a top official of the oil ministry said

New Delhi: The finance ministry has sanctioned an additional Rs15,000 crore to partially compensate state-owned oil firms for losses they incur on selling fuel below cost, reports PTI.

“The ministry of finance has sanctioned an additional compensation of Rs15,000 crore on 11th November,” a top oil ministry official said, adding this compensation is over and above the Rs15,000 crore sanctioned for meeting losses of first quarter ending 30th June.

Oil marketing companies (OMCs) have reported an under-recovery (revenue loss) of Rs21,374 crore in the July-September quarter. Of this, one-third or Rs7,124 crore would be made good by upstream firms like Oil and Natural Gas Corporation (ONGC) and Oil India (OIL).

The finance ministry was asked to make good the rest Rs14,250 crore.

“The finance ministry has issued the sanction letter and the actual cash would be given the oil companies after the Parliament approves supplementary demands for grants in the Winter session of Parliament beginning 22nd November,” he said.

Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) had lost Rs43,526 crore in April-June quarter on selling diesel, domestic LPG and kerosene at government controlled rates which are way below cost.

The oil ministry had asked for Rs29,000 crore cash subsidy for Q1 but got only Rs15,000 crore.

In the April-September period, the three firms lost Rs64,900 crore on selling the three fuels below cost.

The three firms are currently losing Rs11.44 per litre on diesel, Rs26.94 per litre on kerosene sold through the public distribution system (PDS) and Rs260.50 per 14.2-kg LPG cylinder supplied to domestic households for cooking purposes.

“The oil marketing companies are currently incurring a daily under-recovery (revenue loss) of about Rs360 crore on sales of diesel, PDS kerosene and domestic LPG,” he said.

If the prices are not revised, the oil firms will end the fiscal with a total revenue loss of about Rs130,000 crore.

“Financial condition of oil companies is very fragile...

We have been pleading for higher government compensation to the oil marketing companies,” he said.

The oil ministry, he said, wanted the upstream share be limited to historic one-third or 33.33% of the total under-recovery or revenue loss. The finance ministry, however, wants the contribution by ONGC, OIL and GAIL India to increase to at least 50%.

“If we can confine the burden (of upstream firms) to 33.33%, we will be lucky,” he said.

In first two quarters, ONGC, OIL and GAIL bore roughly one-third of the Rs64,900 crore under-recovery. With the latest sanction, the government has agreed to give Rs30,000 crore and the rest was absorbed by retailers.

The official said fuel retailers lost Rs37,719 crore on selling diesel in the April-September period, Rs13,361 crore on PDS kerosene and Rs13,820 crore on domestic LPG.

The cost of the basket of crude oil that India buys averaged $110 per barrel in the current fiscal, as against an average $85.09 a barrel in the first fortnight.

The rupee has depreciated from Rs44.37 to a US dollar in April to around Rs50 this month. “The under-recoveries of oil marketing companies on sale of diesel, PDS-kerosene and domestic LPG increase by about Rs8,000 crore annually on account of every Re1 depreciation,” the official said.

The fall in the value of rupee against the dollar increases the cost of imported crude oil. India is dependent on imports to meet 79% of its oil needs.

Without a price revision, the three firms are projected to lose Rs130,000 crore in revenues on the three products in the full fiscal year, the official said adding oil PSUs were borrowing heavily to meet the shortfall in revenue.

“Borrowings have reached an unprecedented level of Rs131,177 crore necessitated by the need of working capital for payment of imported crude,” he added.


Best mutual fund schemes? Please don’t ask your banker about it!

The maximum commissions being paid by a mutual fund company is to banks, often of the same group, for pushing their schemes. And SEBI wants fund companies to control distributors!

What are the best mutual funds to invest in? There are various easy ways of finding this out. But one of the worst ways is asking your bank relationship manager. Sample this data. Of the Rs21 crore commission paid out to major distributors by Axis Mutual Fund, Rs 14.19 crore or 68% has gone to Axis Bank. Of the Rs288 crore commission paid out by HDFC Mutual Fund one of the largest chunks (14%) has gone to HDFC Bank, which is 35% of the commission earned by HDFC Bank. It is the same with other groups which are into both banking and mutual funds businesses. And when the money is not going so much to the bank of the same group, it is going to another bank.

Clearly, for each bank, the best mutual schemes are none other than the schemes belonging to their own group or the ones that offers the maximum commission. This makes a nonsense of the Securities and Exchange Board of India’s (SEBI) efforts to ensure that distributors do sell fund schemes in an unbiased manner in the interest of customers. To this end, SEBI had issued a direction to asset management companies in 22nd August. As per the SEBI circular, mutual funds are supposed to ensure that customer relationship and transactions shall be categorised either as ‘advisory’ or ‘execution only’. For the advisory function, the distributor will sell “only that product categorisation that is identified as best suited for investors within a defined upper ceiling of risk appetite. No exception shall be made.” For the ‘execution-only’ relationship, if “the distributor has information to believe that the transaction is not appropriate for the customer, a written communication be made to the investor regarding the unsuitability of the product. The communication shall have to be duly acknowledged and accepted by (the) investor.”We had pointed out that this circular was meaningless. “AMCs are really at the mercy of large distributors and SEBI’s move to regulate the latter through AMCs only means looking at the problem of mis-selling from the opposite end! Unless SEBI regulates large distributors directly, the 22nd August circular will have far less meaning than what is intended.

The data showing that banks push hard schemes belonging to the group which may or may not be in customer interest proves our point once again. Here are some facts based on thousands of customers we interact with. Mis-selling by banks is pervasive. Bankers command enormous reach and trust among their customers. All banking processes are geared to maximise sales and profits and this leads to hard selling of products by the so-called ‘relationship managers (RMs)’. RMs at banks have to meet stiff sales targets month after month. They often don’t have sufficient knowledge of the products and learn quickly on the job that the only thing that matters is the sales target. So they just learn to make money from gullible investors.

Unfortunately, savers don’t know this and tend to trust their bankers. After all, that is the place where they keep their savings.

Banks have a readymade database of their clients’ personal details and their financial situation. Armed with such information it is easy for them to cross-sell financial products such as mutual funds and insurance. But this selling usually does not take the customer’s interest into account. It is purely driven by commission. Moneylife has covered many such cases in the past, the most glaring one which the wealth management arm of Kotak Mahindra Bank misled a customer into investing in its India Growth Fund at a steep premium, based on bogus claims and duped him of Rs2.27 crore. (Read:

Now that it is proven that banks are pushing hard fund schemes fund companies of the same group, how does SEBI plan to address this issue? And where does SEBI’s recent concept paper to deal with conflict of interest by separating advisory and sales stand now? A few months back Moneylife pointed out various flaws in the concept paper over a four-part article. One such flaw, as we had pointed out it did not take into account how would banks operate. They can have one desk which ‘advises’ and another desk that ‘executes sales’. It would be the same organisation—and the same mis-selling.




5 years ago

it is a nice article ,,,, awareness is must for general investors


5 years ago

it is a nice article ,,,, awareness is must for general investors

dayananda kamath k

5 years ago

dear sir,
banks are selling mutual fund, insurance without eligible and authorised sales persons to do so as per regulatory directives. this fact has also been brought to the notice of irda and sebi long back but no action so india regulators are stooges in the hand of powerfull lobby


5 years ago

Bankers' job is to market their banks' products as well as transact money instead of other financial products..
In my bitter experience, those unprofessional people who are sitting in mutual fund & life insurance counters are having practice of duping investors.. SEBI MUST BAN BANKERS FROM MARKETING OTHER PRODUCTS WITH IMMEDIATE EFFECT FOR THE SAKE OF INNOCENT INVESTORS!

Prof Bajaj

5 years ago

Bankers have evolved as the biggest mis-sellers in the recent past. Not only MFs, they keep pushing and mis-selling high cost products like ULIPs just to bag high commissions.

I have come across a very good article highlighting the same. Would like to share it with you all.


5 years ago

Why blame RMs(this is digit driven community aiming for next promotion), trust apart its inverstor who merrily handover the money without bothering to check fund/ULIP scheme details. Many time I have seen, so called investors (claiming not to have enough time to delve into details of scheme) sign off standing instructions for investment. This works(!!) well in rising market ...
In nutshell, you must be intelligent enough to protect your own intersts .. at least for hard earned money.



In Reply to Anil 5 years ago

The reason to blame anyone is for misrepresentation amounting to cheating. Now, if you say bankers are born to misrepresent that's another matter. Neither Bank chairmen nor regulators would agree with that.


5 years ago

I am Mutual Fund Investor- Please guide me how to select right distributor/advisor on the basis of their gross total income.
Whether i should deal with HSBC as they have secured No.1 position.
If i want to start SIP of Rs.1,000 and don't have bank account with hsbc,whether hsbc executive will come to my residence on sunday as i am on job mon to friday and reach home late in the night.
Please enlighten on these issues as i hope there may be lot of investors like me, who needs such services.
It seems between directionless fight of big mutual fund distributors and sebi amfi, small investor is lost somewhere.


Sourav Das

In Reply to Mitul 5 years ago

How do you know that HSBC being the No 1? HDFC is currently no 1. Invest in fund like HDFC Top 200 or HDFC Equity if you are looking forward to invest in No 1 mutual fund house. Recently, moneylife published an article where it ranked HDFC Top 200 at no 1 fund house who has returned 17% every year in the last 5 year period.


In Reply to Sourav Das 5 years ago

Mr Das, before recommending a scheme to an investor atleast try understand what the person is mentioning. Mr Mitul is right in pointing out that HSBC is no.1 as far as selling of Mutual Funds goes. HE is not talking about schemes of HSBC or HDFC. Mr Das, you seems to be too obsessed with HDFC schemes, who goes simply by Media projections and do not believe in doing own research.
I fully agree with Mr mitul, that SEBI has lost the direction and is taking absurd decisions which are just not helpful for an actual retail investor or a aam aadmi who does not have lakhs & lakhs to invest. Is there anyone to guide him or help him carry out investing free of cost. HSBC is no 1 distributor because most bank clients have lakhs to invest.


5 years ago



5 years ago

Every body knows this and even SEBI knows it very well that in todays situation of MISS-SELLING Banks are number 1.But why SEBI is going to implement any regulation to the banks.SEBI has no guts to do any thing against banks miss selling of mutual funds .It can only do is to attack small IFA / and small distributors.It can only make TALIBAN rules for mutual fund agents .Shame on it...



In Reply to shankar 5 years ago

While related party/group entity products are a problem area (and may need to be eventually banned to prevent abuse), the actual commissions paid per unit of investment are not very different. I mean whether it is a bank or a small IFA pushing the ULIP or PMS to me - they are going to get the same commissions. I think the larger problem here is that it is hidden from me as an investor. It must be mandatory, at the time of making the investment to clearly disclose the %age and total amount of fees or commission the IFA or bank is going on earn on that transaction - initially or for the term of the investment. For open ended items like mutual funds, it should be total fees earned for a min. 3 year term.

So, if I'm going to "invest" 10,000 every year as premium on a policy (or investment in a fund), what is the expected comission or any other benefits the distributor earns out of my 30,000.

If the industry can provide all kinds of returns illustrations to sell the product, they can also provide right next to that return how much they are earning from you.

Once these large fees are made visible to each customer, people will start questioning the recommendation, asking for better products.

It is the culture of hiding this from customers that has brought us here. And that culture of secrecy was created and protected by the same insurance agents and IFAs who are now complaining, because the big distributors can now beat them at their own game!

Interestingly, even now I don't see IFAs asking for transparency and open disclosure. Most just seem to be wishing for 'good old days' of absurd upfront commissions and calling the big distributors bad.


In Reply to DG 5 years ago

I appreciate your view, only point is that as an investor you also have the right to question the agent/distributor about what he earns out of this. If you are an informed investor you always have the facility to invest directly too. No product is sold without any margin no one does business for charity. A individual advisor always do not risk his relationship with a client by recommending products that do not suit his clients risk profile. There are black sheeps but they cant survive for long.

Deepak Gupta

In Reply to Srini 5 years ago

Dear Srini, I agree with you. The distributor has to make a margin. An informed investor will probably ask about the costs.

But I also realised that this doesn't actually work in reality most of the time, simply because the investor's awareness levels are low. The regulatory framework has to take this into account and provide for mandatory open disclosure of expected costs and service.

We use so many other professional services in our daily life. You know what you finally paid your doctor, your car mechanic, your bank for the demand draft you got made, but somehow the cost of advising and transacting investments and insurance products is lways sought to be hidden away. We need to make the cost obvious upfront. The visibility of cost will drive a large section of investors to make their own choices about the cost and service levels suited for them.


5 years ago

The main problem here is the target-driven RM at the bank misselling any and everything to meet her target. Even the push for same group's mutual funds is secondary. In fact, leaving aside obvious cases like Axis Bank, mutual funds are usually NOT the problem area, especially at the larger banks like HDFC Bank and ICICI Bank.

You don't see this because the commision data is only for mutual funds. It's actually PMS products for HNIs and insurance products - esp old and new ULIPs - that bank RMs really push hard. Simply because the mutual funds don't give them that much fee/commission income!

I believe the transparency on this needs to be pushed for by RBI. Banks must publish every month all fees and commission income or benefit categorised by the type of service, for all services beyond core banking services.

Secondly, we need mandatory disclosure of all fees and commissions on the application forms itself right next to the investment/transaction amount - whether it is a paper form or online. The requirements should be standardised across all financial services including insurance, whether sold to a retail customer, HNI, or business. Across IRDA, SEBI, any commodities regulator etc. - all of them

Sudhakar Kulkarni

5 years ago

Banking channels should be immediately banned from the distribution of mutual funds and insurance products, not only these products are miss-sold but many a times bank customer is under obligation to purchase these products. Even bank staff does not have detailed knowledge of these financial products, on many occasions bank customer thinks this is bank investment and is not made aware of risk associated with same. Since banks are having huge data base and targets are given to each and every staff and the staff is getting commission over and above salary they get prompted to sell the products ignoring customer's benifit.

Deepak R Khemani

5 years ago

This article only proves what the distributor community has been trying to get across to the DEAF and MUTE regulators in India that its time to tame the big fish and not go after the helpless small fish(the retail distributor). In fact during one of the presentations of AXIS MF we were told clearly that if you do not canvass for this NFO our bank will do it for us so better you do it before you lose the Business and our Bank does it for us.

The one point agenda for the regulators in this country is now GET RID OF THE RETAIL DISTRIBUTOR be it mutual funds or now the PPF agents who have given their lives to the PPF collection suddenly find themselves staring at a life of no work and penury as the substantial Business and GOODWILL built by them over so many years will come to nought if the recent changes of no commission to PPF agents is implemented.
All the steps taken by SEBI since Aug 2009 like abolition of loads, Compulsory KYC, KYD, disclosure of Commissions, Unnecessary paperwork at time of change of Bank mandate etc have made life hell for small distributors.
Only god can save this highly segregated and divided community called the RETAIL DISTRIBUTOR or IFA



In Reply to Deepak R Khemani 5 years ago

Quite frankly, the so called IFA have them sleves to blame as much as the Bankers. Most of the IFA are lesser literate than the bankers, and most want pleasures. When I see some of the non cash payouts like holidaying in Thai and Turkey, with the kind of commission they would never have enjoyed it. I know of this friend from a PSU Fund who was telling me, that the IFA was actaully as bad in misselling like a bank. To achieve a ranking for qualifying for overseas trip they end up misselling. Just like the bankers, they want glamour - wine and dine is a very must, even if a Steven Covey session is part of the offsite, these IFAs are no tinterested. So quite frankly, these distributor community by whatever name one may call, has a lot of grounds to cover in terms of integrity and ethics. I think the regulators should do away with them and encourage the asset management companies to hire their own people to sell. I do not have any bias nor sympathy to either of the community.

Deepak R Khemani

In Reply to Mohit 5 years ago

1 friend told yo a story and you are painting all IFA's with the same brush. Please read the article title and comments posted by others before commenting on anyone in general. By the way nobody needs your sympathy.

Dr Vaibhav G Dhoka

5 years ago

SEBI or else any government body usually lay blame on unorganized group In this case it is distributor.And at SEBI it is most manageable regulator in this country.Kotak 's group has taken centreage in PERPETRATION of scams.The group headed by Mr Uday Kotak are trained for such frauds and groups head is cool as he has managed all regulators and top Finance ministry honchos.So no action is assured in every SCAM/Fraud. perpetrated by this group.Therefore Individuals never think of getting Justice from SEBI.Due to corrupt practices at SEBI it now wants to put blame on poor distributor(Made poor by SEBI's different regulations)Its small amount for bankers or brokers to SHARE with SEBI officials from its EXORBITANT gains from FRAUDS.

Melvin Joseph

5 years ago

It is very sad to see that in our country the regulators are sleeping and allowing the innocent investors to lose their hard earned money.
If you look at the performance reports of some new generation banks, they started generating very high income by distributing mutual funds,insurance etc. Customers are thinking that the bank employees are dependable, but they are employed by the banks to sell some toxic investment products.
They are getting their incentives and promotions in time. Only the investor is the loser here.
It is high time that RBI, SEBI and IRDA jointly to look into these aspects and liberate the investors from the so called Relationship Managers.
Please click on the following link to read an article on this topic.


5 years ago

The investing public always feels that just because the bankers handle money, they are fully conversant with anything relating to money. Consequently, it is easy for the banks to leverage on this aspect and push schemes without any profiling of the customers.

It is indeed regrettable that the regulators turn a blind eye to these aspects of investing and instead harp continuously on mis selling by the IFA. Considering the volume of mobilisation by the institutions and the mis selling by them, it is these institutions that need regulations.

‘The media industry needs an independent regulating authority with teeth’

Movie on paid news organised by Moneylife Foundation leaves the audience shocked

“Control over media is a dangerous proposition, but there needs to be an independent authority which can force corrective action on publishers without interfering with their freedom,” said veteran journalist and former Press Council member Mr Paranjoy Guha Thakurta. His comment summed up the lively interactive panel discussion that followed a screening of the movie ‘Brokering News’ by Moneylife Foundation and vCitizens Action Network and MxM India.

‘Brokering News’ is a documentary movie by award winning filmmaker Umesh Agarwal; which deals with four aspects of paid news: election coverage, business and finance, movies and sports. The movie was followed by a panel discussion with the director and eminent journalists like Sucheta Dalal, trustee of Moneylife Foundation, film journalist Bhawna Somaaya, sports journalist Ayaz Memon and Paranjoy Guha Thakurta.

While all the journalists emphasised on the electronic and print media’s need for introspection, they also said that enquiries must be launched against publishers who come up with suspicious-looking content or articles that engage in adulation for an organisation or persons.

Ms Dalal said, “Sebi has written to the Press Council about the menace of paid news, which shows how much this menace has spread.” When asked by an audience member about what implications paid news on business houses may have, she said, “When some news about some fake deal is ‘leaked out’; the share prices of that company moves up. It may not look serious to some, but it has vast ramifications on the stock market and the economy. It is particularly damaging to investors who invest after reading bogus reports.”

Mr Agarwal was asked about including healthcare in the ‘paid news’ ambit. Mr Agarwal replied, “It is a very serious issue. Although we could not include it in this movie, my earlier film, ‘Incurable India’ is precisely about paid news on healthcare services, medicines and doctors. Unfortunately, even when people witness wrong doings, they are helpless. And people from the medicine fraternity rarely act as whistleblowers.”

Ms Somaaya also agreed with him, and talked about a person who acts as a PRO for some doctors in the media. While talking about movies, she said, “The moment critics agree to participate in private screenings by movie makers, they fall into a trap. When the movie gets over, the director/producer would discuss all about ratings and review content and would often not compromise. The review is filed almost immediately after; without any introspection or thought preceding it; and even bad movies get good ratings.” She talked about how she was asked to repeat discussions on Aishwarya Rai’s newborn because bookies had placed huge bets on the event.

Mr Ayaz Memon said that paid news about sports; especially cricket, started when matches were telecasted on television. “Suddenly, some journalists could earn more from one coverage than what they were getting annually. Everyone jumped in, and in order to earn more than their rivals, they started to go for paid news,” he said. He gave the example of IPL, which had many media houses as stakeholders of franchises. “The media went gaga over the IPL, and started to promote it like it was the best thing in cricket. The moment the scam surfaced, they all started to throw muck. The audience should ask that what they were doing for three years, and why they had promoted IPL if they now say that everything was bad about it.”

Mr Guha Thakurta pointed out how for the first time, an Uttar Pradesh MLA’s candidature was cancelled because the Election Commission came to know that she had paid for news coverage. When asked about what is to be done with erring publications, he said that media, apart from self-regulation, must have an independent regulatory authority with teeth. “The PCI and Editors Guild must be empowered. In other countries, they can direct media houses to issue apologies or even fine them in case they cross their limits or publish paid content. Efforts are being made to strengthen the PCI,” he said.

He also said that if someone is convinced that his newspaper is duping him, he should change his subscription. “And if you are repelled by your news channel, use the remote control,” he said.



Chandragupta Acharya

5 years ago

Please release this movie on Youtube and Facebook so that people can watch it and spread the awareness

S H Subrahmanian

5 years ago

Justice Katju, the new chairman of the Press Council of India (PCI), is rather worried about the low quality of the media and its poor intellectual standards. "It doesn't have adequate knowledge of economic theory or
political science or literature or philosophy", he says.
A TV survey reports 74% of viewers supporting these views. Let me too subscribe to this to an extent. His pleading of more powers to the PCI is indeed a threat of action, and it will certainly force the media to introspect.
As far as politics is concerned most of the media is controlled by the congress and the 'dissatisfied' allies!.
Yet, I believe, if the suggestion is for a 'heavy bureaucratic set up', it's a matter for a national debate.

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