The Hindu Business Line : Deora seeks more oil bonds to cover firms’ losses

New Delhi, May 13 Public sector oil marketing companies (OMCs) may soon be issued another round of oil bonds for covering ‘under-recoveries’ faced by these companies during 2007-08 on sale of fuels — petrol, diesel, PDS kerosene and domestic LPG — below their cost price.

The Finance Ministry is now understood to have agreed to issue oil bonds to cover 50 per cent of the estimated Rs 70,579 crore of under recoveries suffered by the public sector OMCs in 2007-08.

The earlier estimate of under recoveries was pegged at Rs 77,000 crore for 2007-08.

The Petroleum Minister, Mr Murli Deora, on Tuesday met the Union Finance Minister, Mr P. Chidambaram, and sought oil bonds to cover in all 57.1 per cent of the total revenue loss of these OMCs for 2007-08.

“We have asked 57.1 per cent oil bonds. And the Finance Ministry is not ready for it. So, we have requested the Finance Minister to issue as much as possible,” Mr Deora told newspersons here.

For 2007-08, the OMCs have so far received oil bonds of the face value of Rs 20,333 crore covering the period April-December 2007. If one were to go by the understanding that oil bonds to the extent of 50 per cent of under recoveries would be covered for 2007-08, then the total value of oil bonds that would be issued by the Finance Ministry for 2007-08 would stand at Rs 35,300 crore, an official source said.

It may be recalled that the Cabinet Committee on Political Affairs (CCPA) had considered the matter in its meeting held on February 14. While approving the GoM’s decision for a marginal price increase in respect of petrol and diesel, the Minister of Finance and Minister of Petroleum and Natural Gas were authorised to decide in consultation with each other the portion of the under-recoveries for 2007-08 to be covered by oil bonds.

The OMCs were suffering revenue loss on sale of petrol, diesel, cooking gas and kerosene sold under the public distribution system (PDS), as they sell the products at Government controlled prices even as there is a surge in global crude prices.

The oil marketing companies – Hindustan Petroleum Corporation, Bharat Petroleum Corporation, Indian Oil Corporation – were losing Rs 14 a litre on petrol, Rs 21 a litre on diesel, Rs 28.72 a litre on kerosene, and Rs 306 a cylinder on cooking gas.

Currently, the Government compensates 42.7 per cent of the losses incurred by oil companies for selling their products at controlled prices.

When asked whether he discussed the need for an upward revision in fuel prices with the Finance Minister, the Petroleum Minister said there was no discussion on the subject, while adding that a decision on price increase could be taken only by the Cabinet.

The Indian crude basket touched a fresh high on Monday at $121.09 a barrel

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