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The Government is committed to providing customers petroleum products at reasonable prices, even while maintaining the financial health of public sector oil retailers, said Mr S. Jaipal Reddy, Minister of Petroleum and Natural Gas.
He told the Consultative Committee of Members of Parliament attached to his ministry here on Friday that international oil prices have been rising.
After the extreme volatility of crude prices in 2008-09, international prices have consistently risen in the recent past. The average price of the Indian basket of crude oil hovers around $112 dollar a barrel in the current year, compared to $69.76 a barrel in 2009-10.
“The Government is committed not only to protect the interest of the common man, but also make available petroleum products of right quality at reasonable prices to consumers,” he said.
At the same time, it must be appreciated that the country's long-term energy security depends on the financial health of the oil marketing companies, he said, adding “If their financial health deteriorates on account of the price under-recoveries, their ability to discharge their assigned task of supplying the entire country with petroleum products would suffer.”
The agenda of the meeting, “petroleum product prices and under-recoveries of the public sector oil marketing companies”, according to the Ministry, was of great importance as India imports more than 80 per cent of its crude oil requirement.
He said that in spite of the recent price increase on the retail front, cuts in customs and excise duties, the oil marketing companies currently incur under-recoveries of Rs 235 crore a day, and are expected to incur under-recovery of over Rs 1.21 lakh crore during 2011-12.
Besides absorbing an estimated annual revenue loss of Rs 49,000 crore on account of duty reductions, the Government also has to compensate a large segment of the remaining under-recoveries, the Minister said.
The under-recoveries have had a significant adverse impact on the financial health of the oil public sector units, with diminishing cash flows and reduced resource generation for capacity expansion and modernisation, he said.
The oil marketing companies are forced to borrow heavily from the market even for their working capital requirement, which is leading to mounting interest burden.
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