The Finance Ministry will give Rs. 12,000 crore in cash to Indian Oil, Hindustan Petroleum and Bharat Petroleum to cover for less than half of the losses they incurred on selling LPG and kerosene this fiscal.
The compensation, which the Finance Ministry insists is for the full 2009-10 fiscal, is inadequate to cover even the Rs. 20,872 crore loss the three retailers incurred on selling cooking fuel during April-December period, Petroleum Secretary R.S. Pandey told reporters here.
“The Government had (in July 2009) decided to compensate oil marketing companies for the entire under-recovery (revenue loss) they incur on selling LPG and kerosene (below cost). What we have received is inadequate and (so) we will continue to pursue the matter with the Finance Ministry,” he said.
Upstream firms Oil and Natural Gas Corp, GAIL and Oil India Ltd will continue to bear the entire revenue loss on petrol and diesel as had been agreed in July, he said.
“We will review the mechanism this quarter (if finance ministry fails to give more compensation),” he said.
IOC, BPCL and HPCL are projected to lose Rs. 47,400 crore on selling petrol, diesel, LPG and kerosene this fiscal. They may lose about Rs. 30,000 crore on cooking fuel alone.
S. Sundareshan, Special Secretary in the Oil Ministry, said IOC would get Rs. 7,000 crore while BPCL and HPCL would get Rs. 5000 crore and actual cash would flow after Parliament approves the additional spending.
“Upon receipt of letter from Finance Ministry promising to give Rs. 12,000 crore, the oil marketing companies have been asked to account for the cash in their quarterly earnings. Actual cash will come after the spending is approved in the supplementary demands for grants in March,” Sundareshan said.
Sources said ONGC, Oil India Ltd and GAIL India, which were earlier to meet only auto fuel losses, may be asked to pick some losses on LPG and kerosene sales if Finance Ministry did not provide for more cash or bonds.
Sources said Finance Ministry was of the view that 2008-09 was an exceptional year when crude oil prices touched a record high of USD 147 per barrel, necessitating issue of Rs. 71,292 crore worth of oil bonds to the three retailers.
It has not issued any bonds or cash for the first three quarters leading to HPCL reporting a net loss of Rs. 136.68 crore in the second quarter, while BPCL posted a net loss of Rs. 158.77 crore. IOC made a marginal profit of Rs. 284.36 crore.
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. 5.42 a litre on petrol, Rs. 3.65 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 and GAIL.