Mr Murli Deora

Our Bureau

New Delhi, Oct. 11 While shielding the customers of auto fuels — petrol and diesel — from the impact of the surge in international oil prices by not raising the prices, the Government on Thursday decided on a package to restore financial health of state-owned oil marketing companies (OMCs).

The package includes issuance of oil bonds, one-third of under recoveries to be shared by the upstream oil companies, and subsidy schemes for kerosene and liquefied petroleum gas to be extended by another three years from April 1, 2007.

“We have kept our promise of not raising prices of sensitive petroleum products,” the Petroleum Minister, Mr Murli Deora, said. Indications are that there would be no price hike this year.

As a principal of equitable burden sharing among the different stakeholders and in line with a similar exercise undertaken last year, the Cabinet has decided that 42.7 per cent of the total under recoveries would be borne by the Government in the form of oil bonds. The OMCs — Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation — are expected to face under recoveries of about Rs 54,935 crore this fiscal, due to the mismatch between the retail prices of the four products and international oil prices.

The Government has decided to issue oil bonds worth Rs 23,457.24 crore for the fiscal. The first tranche of about Rs 12,000 crore to compensate for losses suffered in first half of 2007-08 would be issued soon. The upstream companies — ONGC, GAIL and Oil India Ltd — are expected to bear 35 per cent (Rs 19,227.25 crore) of the total under-realisation.

Besides oil bonds, it has also been decided to extend budgetary subsidy on LPG and PDS kerosene for three more years from April 1, 2007. The Government provides about Rs 2,680 crore from the budget to subsidise cooking fuels, the Minister for Information and Broadcasting, Mr Priya Ranjan Dasmunsi, said briefing newspersons.

The OMCs are currently losing Rs 4.34 a litre on petrol, Rs 6.9 per litre on diesel, Rs 15.95 a litre on PDS kerosene and Rs 175 per on LPG cylinder. The Indian basket of crude oil has averaged about $70 per barrel during 2007-08, as against the average price of about $62 a barrel last year. On Wednesday the crude basket stood at $75.53 a barrel.

Speaking to Business Line, the Indian Oil Director of Finance, Mr S.V. Narasimhan, said, “We are expecting to get around 55 per cent share in oil bonds, including IBP’s share. In case we get a letter on the issuance of bonds ahead of our second quarter results, we’ll account for these in our balance sheet. The second quarter definitely looks positive.”

Mr Jaspreet Singh, Assistant Vice-President, Prabhudas Lilladher Pvt Ltd, said that “assuming that Indian Oil gets bonds in the range of Rs 5,000 crore then the second quarter profit looks to be close to Rs 3,000 crore.

The issuance of the bonds would also improve investor sentiments”.

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