The finance ministry is willing to pay less than half of the Rs 31,700 crore as sought by the petroleum ministry for compensating the revenue losses incurred by state-owned oil marketing companies (OMCs) on kerosene and liquefied petroleum gas (LPG) cylinders at subsidised prices.
A meeting between petroleum and finance ministries today on compensating OMCs ended without any conclusion. “No decision has been taken on the issue (of compensation)... We have not reached any finality,” Petroleum and Natural Gas Minister Murli Deora said after a meeting with Finance Minister Pranab Mukherjee. Deora added that the finance ministry had said that it would rework the revenue loss figures presented by the petroleum ministry and revert in a day or two.
A petroleum ministry official, however, said the finance ministry was not willing to fork out more than Rs 15,000 crore against the loss of Rs 31,700 crore projected for the current financial year. “This is the situation as of today. But more talks will take place to sort out the issue,” he said.
For the current year, the underrecoveries on auto fuels are being fully compensated in the form of discounts from upstream companies like ONGC, OIL and GAIL, while those on sales of kerosene and LPG are supposed to be compensated by the government, either through bonds or in cash.
However, the finance ministry is of the view that since the average crude oil prices have remained lower than that of last year, the compensation should be trimmed. The average price for the Indian basket of crude oil this year has been $68.13 (about Rs 3,100) a barrel, down 18.48 per cent from the average of $83.57 (about Rs 3,810) a barrel for the previous financial year.
The OMCs are estimated to have closed 2008-09 with underrecoveries of Rs 1,03,908 crore on subsidised sale of petrol, diesel, kerosene and LPG cylinders. They have been compensated for the underrecoveries by means of government bonds (worth Rs 71,292 crore) and discounts from upstream oil companies.
The losses incurred this year by the oil marketers are reflecting on their financial performance. For the second quarter of 2009-10, Indian Oil Corporation reported a meagre profit of Rs 284 crore. However, both Bharat Petroleum and Hindustan Petroleum reported losses of Rs159 crore and Rs137 crore, respectively.