Oil pool dues to be written off

The Cabinet Committee on Economic Affairs (CCEA) approved the petroleum ministry's proposal to write off Rs 2,154.75 crore, which CAG said was overpaid to public sector oil companies from the oil pool account.

The finance ministry had earlier given its approval to the proposal. This has come as a bonanza to public sector oil marketing companies and has cleared the way for them to remove uncertainties from their balance sheets and help in a better evaluation of these companies for purposes of raising funds from the market and a possible disinvestment in some of them.

The issue has been hanging fire for some time with the finance ministry insisting on the repayment of this amount and the petroleum ministry arguing against it.

While the finance ministry had said the amount could not be written off as any such move would create a bad precedent and may send wrong signal to other government companies, the petroleum ministry was insisting that it was a damper on the evaluation of the companies.

The CAG audit carried out for the period 1993-98 had pointed out that state-owned oil marketing companies had drawn an extra Rs 2157.75 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 notional amount on which the reimbursement was made.

As per tentative estimates, half of the extra reimbursement was made to Indian Oil Corporation, and the balance to Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited in more or less equal proportions.