Finance Minister Palaniappan Chidambaram, speaking at the 25th anniversary function of Sebi today, advised the markets regulator to “be a fearless regulator.”

If Sebi Chairman UK Sinha wants to take him up on his word, he could fly a trial balloon today itself. He can do no better than toss the Finance Minister’s own words at him and seek a clarification on what he meant in a statement he made on oil subsidies today. The FM’s statements have serious market implications and impact investor rights.

Everyone and the dog at the lamp-post knows that India’s oil companies are at the mercy of the Finance Minister when it comes to receiving their yearly subsidies. Last year’s subsidies were cleared only this year, which left just Rs 20,000 crore for this year’s potential subsidy payments.

From a 2013-14 budget kitty of Rs 65,000 crore for oil subsidies, Rs 45,000 crore went to pay last year’s bills – since the government does not follow basic budgeting principles such as the accrual-based system where the fiscal deficit is worked out after adding up all accrued revenues and expenses, regardless of whether they are actually received or paid out.

This is how he got away with claiming a low fiscal deficit of 5.2 percent in 2012-13, when Rs 45,000 crore of subsidies were yet to be paid.

However, that part of bad accounting practice is for parliament to grapple with.

When it comes to Sebi, it is investors who need to be protected. And Chidambaram’s statements today in Business Standard rank right up there in terms of dubious practices. The newspaper quoted Chidambaram as saying that this year’s subsidies will be half that of last year, at around Rs 80,000 crore. So far, so good.

But where is this Rs 80,000 crore to come from when he is left with only Rs 20,000 crore in terms of available outlays after paying out last year’s subsidies?

Hear Chidambaram on this: “We still have Rs 20,000 crore and another Rs 60,000 crore will come from upstream companies. So, we have got Rs 80,000 crore and we do not think the oil subsidy bill for this year would exceed Rs 80,000 crore.”

The upstream companies he is referring to are ONGC, Gail and Oil India Ltd, all of which are publicly listed companies with minority shareholders. The Rs 60,000 crore that Chidambaram “verbally” swiped from their surpluses is not his money to redistribute at will. It belongs not only to the government, but also minority shareholders in these three companies.

If Tata Steel had debts to pay and Cyrus Mistry glibly announced that he will transfer that money from Tata Motors, Sebi chief UK Sinha would surely object. So why should he not do so when Chidambaram announced the same with listed oil companies?

But there is a double jeopardy involved here.

Under the oil burden sharing formula, the upstream oil companies were to pay 38-40 percent of the subsidies, and the government the remaining 60 percent.

But next year, if Chidambaram plans to apportion Rs 60,000 crore of the Rs 80,000 crore subsidy from the oil companies’ surpluses to the oil marketing companies, the share will have gone up to 75 percent.

Is he saying the upstream companies will now pay 75 percent of the subsidy?

Investors in ONGC, Gail and Oil India should yell blue murder. And Sebi should really send the FM a notice asking him to clarify his remarks.

So, dear Sebi, go ahead and be fearless. The FM wants you to do this.