Finance, Oil Ministry Differ Over Oil Pool Deficit

The differences between the finance and the petroleum ministries over the exact figure of the oil pool deficit came to the fore during the budget presentation yesterday.

While petroleum minister Ram Naik said in a press note issued after the budget presentation that the oil pool deficit would be around Rs 13,000 crore at the end of the current fiscal, the economic affairs secretary CM Vasudev was of the opinion that it would be around Rs 9,300 crore.

He said the government would be issuing oil bonds worth Rs 7,500 crore during the current fiscal.

As per the government's policy, 80 per cent of the oil pool deficit during the current fiscal has to be liquidated by the issuance of oil bonds.

So, it implies that 80 per cent of the total oil pool deficit this fiscal stands at Rs 7,500 crore, which in turn means that the total deficit will be Rs 9,300 crore and not Rs 13,000 crore as suggested by the petroleum minister.

While deciding on new retail prices for domestic liquefied petroleum gas (LPG) and kerosene distributed through the public distribution system (PDS), the finance ministry is learnt to have pegged crude oil prices at around $25-a-barrel. This, however, is far above the prevailing international prices of the crude oil.

The average price of the Indian basket of crude, $27.06 a barrel during 2000-01, came down to $26.24 during the first quarter of 2001-02, $24.64 during the second, and $18.90 in the third. Till now, the average works out to $22.51.

The average for February 2002 is $19.49. The Indian basket is the combination of the Oman/Dubai variety for sour crude and Brent for sweet crude in the ratio 54:46, at free-on-board prices.

International prices of kerosene and liquefied petroleum gas (LPG) have also come down drastically.

"At the current international prices of kerosene, the subsidy on the fuel through the public distribution system comes to just 26 per cent," an Oil Coordination Committee official said.

In the beginning of the current financial year, the subsidy stood at around 45 per cent of the import price of kerosene.

The government plans to bring down the subsidy on kerosene to 33 per cent after the dismantling of the administered pricing mechanism on April 1.

Then, there can be a case for a further reduction in subsidised kerosene prices.While the average price of kerosene in Singapore was $267.47 a tonne during 2000-01, it came down to $241.24 during the first quarter of the current financial year, to $235.44 in the second quarter, and $185.82 in the third.

The average price for the current year, so far, works out to $214.11 a tonne. The average price of kerosene for February 2002 comes to $178.08 a tonne.

The same is the case for LPG. The price of LPG, which was hovering around $305 a tonne in April 2000, came down to $240 a tonne in April 2001, and is now quoted at $205 a tonne.