The government today hiked petrol prices by Rs 4 per litre and diesel by Rs 2 per litre. Kerosene and cooking gas have been spared from any increase in price. This will compensate the oil marketing companies by Rs 9,196 crore. The government has also reduced the custom duty to 7.5% and the pricing will move from the import parity model to trade parity. It has also decided to issue oil bonds worth Rs 28,000 crore.With an upstream contribution of Rs 24,500 crore, the OMCs will be compensated to an extent of Rs 33,696 crore. However, this still leaves a gap of Rs 39,804 crore to be bridged.If the government has to fully compensate OMCs for the under-recoveries being suffered on the account of selling petroleum products below cost, one of the options will be to issue oil bonds worth Rs 39,000 crore. This amount is thrice of Rs 11,500 crore issued last year.The ministry has projected the under-recovery suffered by public sector oil marketing companies, on account of selling below cost price, to be Rs 73,512 crore during 2006-07, if current prices prevail. Of this, a third or Rs 24,500 will be borne by the upstream companies like Oil and Natural Gas Corporation, Oil India and Gail.
