Oil bonds worth Rs 23,458 cr cleared

The Union Cabinet today cleared oil bonds worth Rs 23,458 crore to be issued to government-owned oil marketing companies to partly compensate them for selling petroleum products at subsidised rates, while extending the subsidy scheme for another three years.

The decision pushed up the share prices of the three oil marketing companies "" Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation "" by around 0.8 per cent on the Bombay Stock Exchange.

The Cabinet, however, did not raise prices of petrol and diesel, a move the three oil marketing companies have been demanding in order to minimise their retail losses. "We have kept our promise of not burdening the common man with a fuel price increase," said petroleum minister Murli Deora.

The oil bonds will provide some relief to the three companies, whose revenue loss of sale of subsidised products "" petrol, diesel, LPG and kerosene "" are up to around Rs 200 crore per day from around Rs 180 crore in the first half of September. The government is planning to issue the first tranche of oil bonds worth Rs 12,000 crore in the next 48 hours.

IOC, the country's largest oil marketing company, said it expects to get around 55 per cent share of the total oil bonds.

"In case, we get a letter on the issuance of bonds ahead of our second quarter results, we'll account for these in our balance sheet," the company's finance director SV Narasimhan said. IOC will declare its second quarter results at the end of this month.

Record global crude oil prices have increased the subsidy burden on these companies though the appreciating rupee value against the dollar "" which at nine-year highs "" has provided some offset to the oil marketing companies.

"The total under-recovery on fuel sales is estimated at Rs 54,935 crore. Of this, 42.7 per cent will be borne by the government in the form of oil bonds," Deora said. Besides the oil bonds, upstream oil companies such as Oil and Natural Gas Corporation (ONGC), GAIL and Oil India will also share a part of the total burden.

In the last financial year, the upstream companies together bore around Rs 20,000 crore in terms of discounts to the marketing companies.