Oil pool dues may hit selloff

The proposed disinvestment of the government's equity in Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) has hit another roadblock with the finance ministry insisting on repayment of Rs 6,300 crore that the Comptroller and Auditor General (CAG) says oil companies have overdrawn from the oil pool account.

The issue was discussed at a recent meeting where the petroleum ministry contested the repayment claim and held that the matter be closed for an accurate evaluation of the two companies up for disinvestment.

The finance ministry, however, said the amount could not be written off as any such move would create a precedent and might send wrong signals to other government companies.

The Cabinet Committee on Disinvestment has cleared the proposal to offload 34.01 per cent of the government's stake in HPCL to a strategic partner along with management control, and 35.2 per cent in BPCL through a public offer in the domestic and international markets.

The CAG audit carried out for the period 1993-98 had pointed out that state-owned oil marketing companies had drawn an extra Rs 6,300 crore from the oil pool account as reimbursement for corporate tax payments.

While the companies had been reimbursed on the basis of notional corporate tax payments, the amount of corporate tax that these companies actually paid during this period was around Rs 4,000 crore less than the amount on which the reimbursement was made.

Tentative estimates put the extra reimbursement made to the oil marketing companies at Rs 6,300 crore taking into consideration that the oil pool account was in operation from 1978 to 2002.

Half of this extra reimbursement was made to Indian Oil Corporation, and the balance to HPCL and BPCL in more or less equal proportions.

Industry sources said the matter had to be settled one way or the other before the government invited bids for its equity in HPCL.

In case the matter is not sorted out before the bids are invited, the amount will have to be shown as contingency liability in the books of the oil company.

This was bound to lower the valuation of the company and its disinvestment might fetch a lower amount, the sources said.

On the contrary, in the event of the finance ministry agreeing to write off the amount, the government would get a higher amount for its equity in HPCL, the sources argued.