The Hindu Business Line : Relief at last for oil marketing cos

The much awaited increase in prices of transportation fuels should come as partial relief to the oil refining and marketing companies – Indian Oil, Bharat Petroleum and Hindustan Petroleum – which have been grappling with high under-recoveries for the last few months. But what should make them happier is the decision of the Government to reduce their share of the burden of under-recoveries, pegged at Rs 71,808 crore for this fiscal.

Until now, the under-recovery was shared in the ratio of 42:33:25 between the Government (oil bonds), upstream oil companies and the refining and marketing companies respectively. Now, the Government has decided to increase the share of bonds to 57 per cent while retaining the burden on the upstream companies – ONGC and Oil India.

permanent policy

The share of the refining and marketing companies will, therefore, now fall to about 8 per cent after accounting for the price hike which will wipe out around 2 per cent of the deficit.

The impact of these moves in the current quarter will be muted as exactly half the period is already over. However, it could shore up the numbers for the refining and marketing companies for the whole year, 2007-08, assuming that the Government keeps its promise on the bonds. The refining stocks reacted positively to the news today but long-term interest in them can be sustained only if and when the Government frames a permanent policy on the fuel pricing issue.

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