Indian Oil Corp., the nation’s biggest refiner, and state-run rivals will get 150 billion rupees ($3.4 billion) as compensation for selling fuels below cost, two people with knowledge of the matter said. The payment for the three months ended June 30 is about half of the 290 billion rupees sought by the oil ministry, the people said, asking not to be identified before an official announcement. Compensation from the government and discounts on crude oil by state explorers help the refiners to cut losses and reduce their debt burden. Indian Oil, Hindustan Petroleum Corp. and Bharat Petroleum Corp. sell diesel and cooking fuels below the cost of production to help curb inflation in the world’s second- fastest growing major economy. “The government is working with very little elbow room here,” said Avinash Gupta, vice-president for equity research at Globe Capital Market Ltd. in New Delhi. “They have to keep the refiners afloat on the one hand and keep subsidy payments in check and cut the fiscal deficit.” Prime Minister Manmohan Singh’s government is attempting to cut its fiscal deficit to 4.6 percent of gross domestic product in the year ending March 31, the lowest in four years. Indian Oil shares rose 0.8 percent to 314.90 rupees at 11:09 a.m. in Mumbai trading. Bharat Petroleum was little changed at 658 rupees and Hindustan Petroleum climbed 0.6 percent. The benchmark Sensitive Index fell 1 percent. ONGC Subsidy Indian Oil is scheduled to report first-quarter earnings on Aug. 10. Bharat Petroleum and Hindustan Petroleum are scheduled on Aug. 12, according to stock exchange filings. New Delhi-based Indian Oil may report a loss of 92.96 billion rupees in the quarter, according to the median estimate of 12 analysts compiled by Bloomberg. Discounts given by Oil & Natural Gas Corp., the nation’s biggest energy exploration company, more than doubled to 120.5 billion rupees in the first quarter, the company said July 28. P.K. Goyal, finance director at Indian Oil, S. Roy Choudhury, chairman of Hindustan Petroleum, and R.K. Singh, Chairman of Bharat Petroleum, didn’t answer two calls each to their mobile phones seeking comment on the subsidy payment. To contact the reporters on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net; Anto Antony in New Delhi at aantony1@bloomberg.net To contact the editors responsible for this story: Amit Prakash at aprakash1@bloomberg.net; David Merritt at dmerritt1@bloomberg.net

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