FM may not compensate oil firms

NEW DELHI: Finance Ministry is unlikely to compensate state-owned oil refining firms for the Rs 2,000 crore loss they bore during April-May last year for selling petrol and diesel below the cost of crude.
"Finance Ministry does not subscribe to the argument that oil firms lost heavily. They have pointed to the healthy first quarter results of the refiners to discount the loss theory," highly placed sources said.
Sources said Finance Ministry, which was already finding it difficult to meet the targeted fiscal deficit, was unlikely to issue the promised Rs 2000 crore bonds.
Petroleum Minister Ram Naik had on June 3, 2002 announced that Indian Oil, Bharat Petroleum, Hindustan Petroleum and IBP would be compensated Rs 2,000 crore they together lost during April and May for maintaining the price line in spite of over five dollars per barrel surge in global crude prices.
When contacted, Petroleum Secretary B K Chaturvedi said "they (finance ministry) have not yet taken a view (on giving bonds). Finance Ministry is finding it difficult to understand how oil companies lost Rs 2,000 crore when their balance sheets show healthy growth in profits."
Oil companies had posted between 10 to 40 per cent increase in their net profit during the first quarter (April-June).
Instead, Finance Ministry will draw over Rs 3,000 crore from oil firms by way of interim dividend to make up for the shortfall in realisation from disinvestment. Stating that the Finance Ministry had communicated its requirement, Chaturvedi said IOC, BPCL, HPCL, GAIL and OIL India will pay interim dividends for 2002-03. He, however, did not specify the exact quantum of payout by each company.
He said Finance Ministry has also not accepted principle of import parity-based pricing for fixing subsidies on domestic cooking gas (LPG) and kerosene for Public Distribution System (PDS).
Under the flat rate subsidy scheme, Finance Ministry has pegged subsidy on LPG at Rs 71 per cylinder, which falls short of the average import parity price by about Rs 50-60 per cylinder. Similarly, on kerosene, the subsidy element has been pegged at Rs 2.57 per litre, about Rs 1.50 per litre short of import parity price.
Chaturvedi said the Finance Ministry did not agree with oil companies'' contention for a subsidy of Rs 87 per cylinder for LPG and Rs 3.50 per litre on kerosene.
"Finance Ministry refused to accept the import parity pricing principle for LPG as it felt prices in west vary seasonally (high during winter due to increased demand for heating purpose), a trend not observed in India," he said.
He said at Rs 71 per cylinder and Rs 2.57 per litre subsidy level, the outgo on this account would be close to Rs 7,000 crore as opposed to budgeted figure of Rs 4,495 crore.
Oil companies, which have been till October reimbursed Rs 45 per cylinder for selling LPG at subsidised price, will get an additional Rs 900 crore on account of the increased subsidy level but will still leave a dent of about Rs 2500 crore on their bottomlines, industry sources said.