The Hindu Business Line : Package for oil companies soon

“Immediate measures need to be taken to save the oil companies. And I have apprised the Prime Minister of the same. Various options are being considered,” Mr Murli Deora said

Relief coming: The Union Minister for Petroleum, Mr Murli Deora, coming out of the Prime Minister's office after a meeting with the Prime Minister, Dr Manmohan Singh, in the Capital on Friday.

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New Delhi, May 23

A relief package for the public sector oil marketing companies (OMCs) that are facing financial crunch due to continued surge in global crude oil prices is expected sometime soon.

The measures to compensate the three OMCs – Indian Oil Corporation Ltd, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporate – for selling the petroleum products below the cost price include revision in auto fuel prices, rejig in customs and excise duties, issuance of more oil bonds, subsidies to be borne by upstream companies and increasing the credit limit of the retailing companies.

The Petroleum Minister, Mr Murli Deora, had a meeting with the chiefs of three public sector OMCs today reviewing the situation and subsequently appraised the Prime Minister Dr, Manmohan Singh of the same. Amidst speculations that the Government may increase petrol and diesel prices, the Petroleum Minister said, “immediate measures need to be taken to save the oil companies. And I have apprised the Prime Minister of the same. Various options are being considered. A package is being worked out.”

While declining to give a timeframe, Mr Deora said, “I just can’t say by when a decision will be taken. It may take 3 to 4 days.”

“The Prime Minister is very concerned about the financial health of PSUs and he has asked his Principal Secretary to call a meeting with the Secretaries of Finance and Petroleum and the PSU chiefs to work out a solution to this problem,” he told newspersons after his meeting with the Prime Minister. The Petroleum Ministry is seeking a cut in customs duty on crude oil from five per cent to zero and petroleum products from 7.5 per cent to 2.5 per cent.

The Petroleum Secretary, Mr M.S. Srinivasan, said, “The options are getting narrower. It (fuel price hike) is inevitable.” The three marketing companies are suffering a revenue loss of Rs 550 crore a day on sale of petroleum products – petrol, diesel, kerosene and LPG - below the cost price. The continued surge in crude prices has led to these companies facing huge liquidity crunch. The companies are borrowing Rs 3,500 crore a month to meet their day-to-day expenses. At the current crude prices, the under recoveries to be suffered by the OMCs for the current fiscal is estimated to be Rs 200,000 crore. The contribution of the petroleum sector towards customs and excise duties to the Central exchequer for 2006-07 stood at Rs 68,864 crore (Rs 61,221 crore in 2005-06). The contribution to the States’ kitty in the form of sales tax, royalties, octroi etc. was Rs 62,121 crore for 2006-07.

The Indian crude basket on Thursday hit a fresh high of $129.08 a barrel. The basket averaged $119.27 per barrel for the current month till Thursday, up from the previous months average of $105.77 a barrel.