HPCL to get govt guarantee on oil subsidy

 Since the Cabinet has decided to keep the prices of domestic LPG and PDS kerosene unchanged till September 2004, the government may have to compensate the company for its losses on the sale of the two subsidised cooking fuels for around nine months in case HPCL is privatised by December this year.

 "We cannot make a private sector oil company bear any subsidy burden. Therefore, after it is privatised, HPCL will be compensated for servicing its clients," petroleum secretary B K Chaturvedi told 'Business Standard' here today.

 Since the annual under-recoveries of the oil companies due to the sale of the two petroleum products are expected to be around Rs 7,200 crore, HPCL's share of these losses would come to Rs 1,500 crore for an entire year. For the nine months after its privatisation, these losses are expected to be around Rs 1,125 crore.

 Chaturvedi said that all the public sector oil companies, upstream and downstream, would be made to share the subsidy burden. This would mean that besides Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL), Gail India Limited will also have to share this burden. However, Reliance Industries Limited, being in the private sector, will not be asked to share this burden, he said.

 It was earlier feared that the government may be forced to defer privatisation of HPCL for the fear of losing control over pricing of the politically sensitive products like domestic LPG and kerosene during an election year.

 At present all the oil companies selling the two subsidised products are in the public sector and the government has not allowed them to raise their retail prices despite a substantial increase in their international prices.

 The Cabinet Committee on Disinvestment has already cleared a proposal to offload 34.01 per cent government's stake in HPCL to a strategic partner along with management control. It has also been decided to offer another 5 per cent stake to employees in the corporation, at concessional rates.

 The disinvestment ministry has drawn up a roadmap to accomplish this task by October-November this year.