The Hindu Business Line : `Govt working on pricing plan to ensure oil cos' capex is not hit'

THE Petroleum Minister, Mr Mani Shankar Aiyar, today said the Government would have to come out with a pricing policy for petroleum products to ensure that investment plans of the bleeding oil marketing companies (OMCs) do not suffer.

Speaking at a conference on `Strategic shift in Indian downstream sector', the Minister said, "The Government policy will ensure that the capital expenditure of oil companies is not affected by the current pricing policy. We are working on a formula." He, however, did not elaborate as to when the Government would allow raising prices.

Indian Oil Corporation (IOC) the country's largest refiner, showed a net loss of Rs 54.23 crore, compared with net profit of Rs 1,472 crore during the corresponding previous period.

The company Chairman, Mr S. Behuria, had then said that this would impact expansion plans and compel it to review all new investment proposals.

Giving the reason for the loss, Mr Behuria had said, this was mainly due to under-realisation of Rs 3,194.52 crore on sale of petrol, diesel, LPG, and kerosene during the first quarter against Rs 1,786 crore last year, consequent to non-revision of retail selling prices in line with international prices.

Mr Behuria said that the under-realisation on the four sensitive petroleum products was after ONGC and GAIL (India) Ltd chipped in with Rs 1,674.67 crore as subsidy, without which IOC's losses would have been close to Rs 1,000 crore.

Mr Aiyar called for a strong, vibrant and integrated public sector.

He said that to attract high level of foreign direct investment in the refining sector a mechanism on the lines of the New Exploration and Licensing Policy (NELP) is required.

``This year the focus would be on refining. Refinery margins in India are among the highest in the world and it should attract people to invest in creating more refining capacity,'' he said.

He also said that the Government would push ahead building new refineries for making India a petroleum product export hub.

Mr Aiyar also said to attract foreign investments into the country the domestic refiners need to invest overseas.

"We are not going to get inward investments in refining unless we see ourselves as partners outside," the Minister said.

"Currently, Iranian National Oil Company has a 15 per cent stake in Chennai Petroleum Corporation Ltd and Oman has a miniscule stake in Bharat Petroleum Corporation Ltd's proposed Bina refinery in Madhya Pradesh," the Minister said. In fact, in the refining sector, there is virtually no foreign collaboration, he said.

"We were hoping that HPCL may get a stake in Saudi Aramco's Yanbu refinery, but that has not happened."

Speaking on India losing out to China in the bid to acquire 51 per cent of Canada-based PetroKazakhstan, he said that the domestic companies need to bid aggressively.

"This has validated my view that India and China should co-operate with each other rather than competing with each other for acquiring stake in overseas oil and gas assets," the Minister said.

The Minister said that the Government wants exports of petroleum products to exceed gems and jewellery, which currently are the highest export earners for the country, in the next couple of years.

Exports of 17 million tonnes of petroleum products earned Rs 28,000 crore in revenues in 2004-05 and paid for about a quarter of Rs 117,000 crore on oil import bill, he said.

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