According to a new report, lower crude oil prices in the global markets could reduce the subsidy burden on the government by about Rs 40-50,000 crore.

Latest estimates by ratings agency Crisil showed that the lower prices could reduce the financial burden by significant Rs. 40,000-50,000 crore for the government and help control the deficit of the government this year. The agency said that the lower oil prices is a positive development for the country as it will lower under-recoveries and also reduce the import bill.

The total under-recoveries, which is the difference between the purchase price of crude oil and the retail price of fuel sold in the country, are expected to fall to fall to Rs. 70000-80000 crore in the financial year 2013-14. According to the estimates, the total under-recoveries will be recorded at around Rs 1.5-1.6 lakh crore in 2012-13.

Crisil said that the fall in under-recoveries will allow the oil marketing companies (OMCs) to imrpiove their position in the country this year. "This would lead to an improvement in their profitability and liquidity position, led by better cash flows and lower reliance on short-term loans to fund working capital requirements," Crisil said.