Oil companies may get Rs 12,000 crore

The finance ministry on Thursday agreed to pay Rs 12,000 crore in cash as subsidy to the three state-owned oil marketing companies for revenue losses incurred during April-December on sale of auto and cooking fuels at government-regulated prices, a senior government official said.

The compensation package is about 43% lower than the oil ministry’s demand for Rs 20,872 crore.

“The finance ministry is expected to issue the letter to the oil ministry by Friday intimating about the cash subsidy payout for the first nine months,” the official said.

On the basis of the finance ministry’s letter, the three state-owned oil retailers — Indian Oil Corp Ltd, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd — can make adjustments to their financial results for the October-December quarter.

“This is being done to help the oil retailers stay afloat in the October-December quarter. The actual cash subsidy is likely to come in the supplementary demands for grant in the Budget session,” the government official said.

Had the intimation not come, the three companies together would have posted a net loss of Rs 5,000-6,000 crore in October-December quarter, the official said.

The finance ministry agreed to pay Rs 12,000 crore for the first nine months following a meeting between petroleum and natural gas minister Murli Deora and finance minister Pranab Mukherjee earlier on Thursday.

The break-up of the subsidy payout is being worked out by finance ministry and Petroleum Planning and Analysis Cell of the petroleum ministry, the official said.

Oil ministry estimates the total revenue loss of the three public sector oil companies in 2009-10 at Rs 45,000 crore.

However, the finance ministry is only willing to bear one-third of this.

Last year, the government had borne the entire subsidy burden on cooking fuels such as kerosene and liquefied petroleum gas, while state-owned upstream companies like Oil and Natural Gas
Corp and Oil India Ltd shouldered the losses on petrol and diesel.

The petroleum ministry sought Rs 20,872 crore compensation from the finance ministry for April-December based on last year’s formula.

In 2008-09, the government had issued Rs 71,292 crore worth of oil bonds, as oil retailers incurred Rs 103,000 crore of revenue losses due to extreme volatility in crude oil prices. NW18