Financial Daily from THE HINDU group of publications
Sunday, Oct 03, 2004
Financial Daily from THE HINDU group of publications Sunday, Oct 03, 2004 |
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Petroleum Industry & Economy - Petroleum Government - Policy LPG, kerosene subsidies — ONGC, OIL and GAIL have to bear only a third of the burden Our Bureau
New Delhi , Oct. 2 THE Government has decided to burden Oil and Natural Gas Corporation, GAIL (India) Ltd and Oil Indian Ltd with only one-third of the subsidy borne by public sector oil marketing companies on sale of LPG and kerosene during the second quarter of the current fiscal. The Petroleum Ministry was considering a proposal involving sharing of LPG and kerosene subsidy on a 50:50 basis, totalling Rs 4,600 crore during the second quarter of the current fiscal, since crude rose to an average price of around $44 per barrel this quarter, up from $35 per barrel the previous quarter. Crude producer ONGC gained significantly on this count while the marketing companies' losses on sale of LPG and kerosene rose sharply. However, it was decided at the last minute to stick to the old formula where ONGC, GAIL and OIL will share one-third of the subsidy. Hence, according to the Government-approved formula, the three companies will bear around Rs 1,500 crore. Interestingly, while the Petroleum Minister, Mr Mani Shankar Aiyer, has signed the file, the orders have not been issued. Marketing cos not happy: Meanwhile, the public sector oil marketing companies led by Indian Oil Corporation have protested and are seeking a review of the subsidy sharing formula. "ONGC has made a windfall profit during this quarter even as we have lost more money on sale of LPG and kerosene. We have also lost money on sale of petrol and diesel. The only redeeming feature of this quarter's performance is that we have made some money on the refinery margins which have gone up with the rise in crude prices," a senior official with an integrated refining and marketing company said. The entire industry has lost Rs 2,000 crore since the beginning of the year on sale of petrol and diesel, of which IOC accounts for around Rs 1,000 crore. As per a pricing formula introduced two months ago by the Government, the oil marketing companies were allowed to alter petrol and diesel prices, if they stepped out of a band. The band is defined by the average price over the previous three months and the average price over the previous one year. However, about a month ago, the Government withdrew the flexibility to review the prices. The band was breached a week ago when the oil companies sought a Re 1 per litre hike in the price of diesel. The Government did not agree to this on Thursday when the Prime Minister, Dr Manmohan Singh, reviewed the situation. If the band is not taken into consideration, the loss for oil companies is Rs 2,000 crore on sale of petrol and diesel since the beginning of the current fiscal.
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