Oil ministry seeks Rs30,000 crore bonds for fuel retailers

Though the government had earlier this fiscal decided to compensate state-run oil marketing companies by way of oil bonds, the finance ministry has not issued any bonds during the first three quarters.

Petroleum minister Murli Deora is seeking bonds worth Rs30,000 crore for state-run fuel retailers to make up for the losses they incurred on selling domestic LPG and kerosene this fiscal, reports PTI.

"He (Deora) will meet the finance minister (Pranab Mukherjee) this evening on the issue," petroleum secretary RS Pandey told reporters in New Delhi.

Though the government had earlier this fiscal explicitly decided to compensate Indian Oil Corp (IOC), Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL) for the losses they incur on selling domestic liquefied petroleum gas (LPG) and kerosene through the public distribution system (PDS) by way of oil bonds, the finance ministry has not issued any bonds during the first three quarters (April-December 2009).

The three state-run companies lost Rs11,853 crore in revenues due to not being allowed to raise LPG and kerosene prices in line with the cost during April-September. An additional Rs9,019 crore revenue loss was incurred in the third quarter ending 31st December. Mr Deora had last month met prime minister Manmohan Singh on the issue and it may figure again during a review meeting that the PM will hold tomorrow evening.

"We are hopeful that compensation will be issued... Whether it is in the form of oil bonds or cash, it has to be decided," Mr Pandey said.

For the first nine months, oil bonds worth Rs29,872 crore have been sought, he said, adding that for the full fiscal, about Rs30,000 crore is likely to be the revenue loss on sales of LPG and kerosene.

Mr Deora had, on at least two occasions, written to Mr Mukherjee; and on 21st December, he met the PM to request for issuance of oil bonds. However, the finance ministry did not provide for the funds in the supplementary demands of grant (extra spending) that was approved by Parliament last month. "We have not got any bonds this fiscal," Mr Pandey said.

In the absence of bonds, BPCL and HPCL reported net losses in Q2 while IOC barely made a profit. Mr Pandey said the government had decided to make good all of the revenue lost on sale of LPG and kerosene through issue of oil bonds, while the revenue loss on petrol and diesel sales was to be met by upstream firms like Oil and Natural Gas Corp (ONGC).

The three companies currently lose Rs3.06 per litre on petrol, Rs1.56 per litre on diesel, Rs17.23 per litre on kerosene and Rs299.01 per LPG cylinder, he said. They are projected to lose about Rs44,300 crore in revenues for the current fiscal.

Officials said under-recoveries or revenue loss on petrol and diesel amounting to Rs4,003 crore had been compensated by ONGC, Oil India and GAIL India through price discounts on crude oil and products sold to retailers.

The government had issued oil bonds worth Rs71,292 crore in the previous fiscal (2008-09).

HPCL reported a net loss of Rs136.7 crore in the second quarter, while BPCL posted a net loss of Rs158.8 crore. IOC was slightly better off, registering a net profit of Rs284.4 crore.

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