The government is veering round to the idea of liquidating up to 80 per cent of the oil pool deficit at the end of the current fiscal by issuing seven-year tradable bonds to oil companies.
The balance 20 per cent would be settled after the Comptroller and Auditor General (CAG) submits its audit of the oil pool account.
Talking to newsmen here after his meeting with finance minister Yashwant Sinha today to discuss deregulation of the petroleum sector by March 31, 2002, petroleum minister Ram Naik said CAG had been asked to audit the oil pool account so as to remove any anomalies in its calculations.
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He said the issue of bringing down the subsidies on kerosene sold through the public distribution system and domestic liquefied petroleum gas (LPG) would be looked into by the Union Budget for 2002-03.
The minister, however, declined to say if the prices of PDS kerosene and domestic LPG would be raised to reduce subsidy on them to 33.33 per cent and 15 per cent respectively.
Naik said: "Eighty per cent of the oil pool deficit, which presently stands at Rs 13,000 crore, would be liquidated through issue of seven-year bonds. These bonds would be tradable in the market." Interest rate and other details of the bonds issue, which would carry the government's sovereign guarantee, are being worked out.
CAG would conduct a special audit into the oil pool account to assess the exact amount of outstandings due to national oil companies and bonds for the balance 20 per cent would be issued only after reconciliation of accounts, the minister said.
Regarding the government's commitment to reduce subsidy on kerosene and LPG from 41 and 45 per cent respectively, Naik said prices would have to be increased by Rs 1.20 per litre for kerosene and between Rs 90-100 per cylinder of LPG to bring the subsidies to the residual level.
However, doing that in one go may not be practical. This along with the issue of duty changes would be dealt with in the Budget next year. The minister said the draft Bill for putting in place a regulatory mechanism after the dismantling of administered pricing mechanism (APM) is ready and would go for final vetting by the law ministry.
The Bill, which envisages two separate regulators for upstream oil exploration and downstream refining sectors, was likely to be introduced in Parliament in the Budget Session. Naik said the regulator would ensure supply of petroleum products throughout the country and check undue profiteering.
Asked if the regulator would regulate prices of petroleum products, he said that "excessive profiteering would not be acceptable."
Four inter-ministerial sub-groups constituted to suggest solutions to issues like changes in duty structure, liquidation of oil pool deficit, bill for deregulation, regulatory issues post APM and subsidies on kerosene and LPG, submitted their report today and these would be discussed in the next meeting on October 31, the minister said.
Regarding duty changes to be effected before April 2002, Naik said the issue of duty changes was not discussed at today's meeting.