The Finance Ministry on Friday agreed to give just over Rs 12,000 crore in cash to State-run fuel retailers to cover for their losses in the current fiscal, a far cry from Rs 29,405 crore they were seeking.
The Finance Ministry sent a letter to the Oil Ministry saying Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp will be paid Rs 12,020 crore in cash to cover for their losses on sale of domestic LPG and kerosene in 2009-10.
Oil Minister Murli Deora on Thursday pleaded with Finance Minister Pranab Mukherjee for keeping his July 2009 promise of making up entire losses on the cooking fuel by way of either oil bonds or cash. It was then agreed that losses on petrol and diesel would be made up by upstream firms like ONGC.
Petroleum Ministry sources said they will accept the cash offered as “part-payment” for the losses in 2009-10 fiscal and continue to press Mr. Mukherjee for more.
The Finance Ministry feels that since oil prices have not caused “exceptional” burden on State-run firms, the 2006-07 formula of the government picking up one-third of the revenue loss on fuel sales should apply.
IOC, BPCL and HPCL are projected to lose Rs 29,405 crore on sale of domestic LPG and kerosene below cost. Another Rs 12,000 crore loss is projected on petrol and diesel.
Sources said ONGC, Oil India Ltd and GAIL India, which were previously to meet only auto fuel losses, may be asked to pick some losses on LPG and kerosene sales.
Sources said the Finance Ministry was of the view that 2008-09 was an exceptional year when crude oil prices touched a record high of $147 per barrel, necessitating issue of Rs. 71,292 crore worth of oil bonds to the three retailers.
The Finance Ministry has not issued any bonds or cash for the first three quarters leading to BPCL and HPCL to report net losses in the second quarter, while IOC barely made a profit.
HPCL reported a net loss of Rs 136.68 crore while BPCL posted a net loss of Rs 158.77 crore. IOC made a marginal Rs 284.36 crore profit.
For the first nine months, oil bonds worth Rs 20,872 crore, which was the loss on sale of domestic LPG and kerosene, had been sought, they said adding another Rs 8,508 crore was lost on petrol and diesel in April-December period.
The three firms currently lose Rs. 3.06 a litre on petrol, Rs. 1.56 per litre on diesel, Rs 17.23 a litre on kerosene and Rs 299.01 per LPG cylinder.
Sources said under-recoveries or revenue loss on petrol and diesel amounting to Rs 4,003 crore in April-September had been compensated by ONGC, Oil India and GAIL India through price discounts on crude oil and products sold to retailers.