To return Rs 900 cr collected in H1

Richa Mishra

Pricing woes


Discounts to

OMCs such as Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum have been discontinued with retrospective effect from April 1, 2006.

Currently, OMCs

are suffering an under-recovery of Rs 132 per cylinder on cooking gas and Rs 13.81 per litre on kerosene.

New Delhi, Dec. 10

The State-owned oil marketing companies (OMCs) are in the process of returning the discount of about Rs 900 crore collected in the first half of the current fiscal to standalone private and public sector refiners.

Standalone private and PSU refiners were extending discounts on petroleum products - domestic liquefied petroleum gas and kerosene under the public distribution system sold by them to retailers to partially offset the under-realisation suffered by retailing companies because of selling the products below the cost price following a Government mandate.

Payment

Discounts to OMCs such as Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum have been discontinued with retrospective effect from April 1, 2006. The OMCs have now agreed to make payment of full refinery transfer prices towards sale of LPG and kerosene with effect from April 1 without deducting any discounts, official sources said. The annualised amount to be returned to standalone refiners would work out to about Rs 2,000 crore, sources said.

With the recent Government decision, it has become imperative for OMCs to refund the amount for the first two quarters of the fiscal to standalone refiners such as Mangalore Refinery and Petrochemicals Ltd (MRPL), Chennai Petroleum Corporation Ltd (CPCL), Reliance Industries Ltd (RIL), Numaligarh Refinery (NRL) and Kochi Refineries.

Of the estimated Rs 900 crore, the amount to be returned to RIL was close to Rs 320 crore, CPCL (Rs 110 crore), MRPL (Rs 142.88 crore), Bongaigon Refinery and Petrochemicals Ltd (Rs 40 crore), and the rest to the refineries of Indian Oil, Hindustan Petroleum, Bharat Petroleum among others.

Price fluctuations

Asked whether this would affect the profitability of the OMCs that have been taking a hit due to fluctuations in crude price and selling products below the cost price, sources said the impact may not be much, as most of the retailing companies also had their own refineries.

"Some amount is coming back to the companies," they explained. For the second half of the fiscal, the retail companies may have to account for under-realisation suffered on the sale of two products in their own books amounting to approximately Rs 1,100 crore depending on the international crude prices.

Currently, OMCs are suffering an under-recovery of Rs 132 per cylinder on cooking gas and Rs 13.81 per litre on kerosene.

With RIL declining to extend any discounts for the current fiscal, MRPL had approached the Petroleum Ministry seeking level-playing field on the issue. The Petroleum Ministry, after considering MRPL's request, felt that the standalone refiner could seek refund of discounts on LPG and kerosene from retailing oil companies with effect from April 1.

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(This article was published in the Business Line print edition dated December 11, 2006)
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