| Oilís not well
New Delhi, July 16: The objection raised by the Comptroller and Auditor General of India (CAG) over the national oil companies having drawn an extra Rs 6,000 crore from the nationís oil pool account as reimbursement for corporate tax payments has emerged as a major issue while disinvestment minister Arun Shourie rushes ahead with the selloff process for Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation (BPCL).
Sources disclose that the ticklish issue of whether the money has to be recovered from the national oil companies will have to be resolved before any meaningful valuation of the two companies on the selloff list can be carried out.
While public interest petitions against the disinvestment of the oil majors are still pending in the Supreme Court, Shourie appears to be proceeding ahead on the assumption that the apex court will give the go-ahead for the sale.
Sources disclose that the CAG objection on the issue cannot be taken lightly. It has been made by the supreme audit authority of the country and such reports are also submitted to the Parliamentary Accounts Committee.
The issue also has to be sorted out as the valuation of the two companies will vary according to whether the national oil companies are asked to repay the amount or not.
The CAG audit carried out for the period 1993-98 had pointed out that the oil companies had been reimbursed from the oil pool account on the basis of notional corporate tax payments.
However, the amount of corporate tax that these companies actually paid during this period was around Rs 4,000 crore less than the notional amount on which the reimbursement was made.
The discrepancy had arisen as the oil majors had availed of various tax exemptions which were permissible for profits ploughed back as investments in priority areas.
Since the oil pool account was in operation in the hydrocarbon sector from 1978-2002, the estimate for the extra amount that has been reimbursed will have to include this longer period. Tentative estimates put this figure at around Rs 6,300 crore. While roughly half this amount will be due from Indian Oil Corporation, the remaining half will have to be recovered from HPCL and BPCL in more or less equal proportions.
The problem has arisen due to the fact that under the regulated regime, which was in operation till March 31, 2002, the national oil companies had to sell their products at controlled prices and were allowed a 12 per cent post-tax return on their capital.