The Hindu Business Line : Petrol to cost Rs 3 more, diesel Rs 2 <br>LPG, kerosene spared; Govt to issue oil bonds to offset losses

HIKE AT LAST: The Union Minister for Petroleum and Natural Gas, Mr Mani Shankar Aiyar, coming out in a wheelchair after a Cabinet meeting at the Prime Minister's residence in the Capital on Tuesday. The Minister's personal staff said Mr Aiyar tripped and sustained a sprain on his right leg during a visit to Iceland last week. - Ramesh Sharma

New Delhi , Sept. 6

FACED with spiralling international oil prices and the consequent losses suffered by the domestic oil companies, the Government on Tuesday approved a partial hike in petrol and diesel prices by Rs 3 and Rs 2 per litre, respectively. But, LPG and kerosene prices remain unchanged. The new prices come into effect from midnight tonight.

Briefing newspersons after the Cabinet meeting, the Minister for Petroleum and Natural Gas, Mr Mani Shankar Aiyar, said the Government would also be issuing bonds to the oil companies to offset the losses suffered due to non-increase in the prices of LPG and kerosene, and also for selling fuel below cost.

The value, size and maturity period of the bonds would be worked out between the Finance Ministry and the Reserve Bank of India, Mr Aiyar said.

Elaborating on the Cabinet decision, the Petroleum Secretary, Mr S.C. Tripathi, said, "Of the total under-recovery, the consumer will bear only 12-13 per cent, while petroleum industry would be burdened the most with 51-52 per cent share. The Government itself would take on 36 per cent of the share."

Mr Tripathi added that the revenue impact of the bonds to refiners in lieu of subsidy payments was not immediately known as the Finance Ministry was still working out the details. He, however, indicated that the bonds could be for at least Rs 10,000 crore. They would be issued to the retailers such as Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation in about a week.

The Petroleum Secretary explained that the price increase, along with the bonds, trade discounts and contribution from the upstream companies would help refiners narrow their revenue loss in the year ending March 2006 to Rs 4,000 crore from Rs 40,000 crore projected earlier.

The price hike in the case of petrol and diesel would rake in about Rs 5,000 crore in the remaining part of the financial year, Mr Tripathi said.

Discounts from standalone refineries: As per the decision taken by the Petroleum Ministry, the standalone refineries such as Reliance Industries and MRPL would give discounts to oil marketing companies (OMCs) on LPG and kerosene. The discount would be in the range of Rs 1,200 crore to Rs 1,500 crore.

The discount for petrol and diesel would be over and above the discount being offered by MRPL and Reliance on the sale of LPG and kerosene. The upstream companies such as ONGC would contribute one-third of the revenue loss. At least "Rs 13,000 crore to Rs 14,000 crore would come from upstream firms by way of discounts," he said.

The Secretary further said that the hike would improve cash profits of the oil companies, who made net losses in the April-June quarter. "But for the price hike, IBP was to become sick by month-end."

While stating that the second quarter of the fiscal would be bad for oil firms, he said that they, however, would be able to recover in the remaining part of the fiscal. While IBP may remain in red for some time, IOC, HPCL and BPCL would return to black from next quarter.

Regarding why the Government did not cut duties on petroleum products, the Secretary said indirect tax revenues from the oil sector had grown by only 9 per cent instead of the projected 15 per cent in the first quarter.

`Liquidity will improve': Reacting to the Government decision, the IOC Chairman, Mr S. Behuria, said the price hike coupled with oil bonds, which the oil companies can trade in market to get cash immediately, would improve the liquidity position of companies.

Upbeat on Myanmar pipeline

NEW DELHI: The Petroleum Minister, Mr Mani Shankar Aiyar, was hopeful that the draft memorandum of understanding for laying the Myanmar-Bangladesh-India natural gas pipeline was likely to be approved by the respective Governments and work on the project would begin after that.

Speaking to newspersons after the Cabinet meeting, the Minister said that during his visit to Dhaka, he met all the senior leaders, including leader of Opposition, in connection with the three-nation pipeline. He added that the officials of Bangladesh have been invited to India, after Dhaka approved the draft MoU for carrying out further activities.

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