| Deora: Action time
New Delhi, Nov.1: As global crude prices simmered near the $100-per-barrel-mark, petroleum minister Murli Deora today held separate meetings with Prime Minister Manmohan Singh and finance minister P. Chidambaram over a fresh bailout package for oil marketing PSUs.
In the meetings, Deora sought equitable sharing of the crude burden among the government, the oil marketing companies and consumers.
In tandem with the global price, the Indian basket of crude has shot up to $84.31 per barrel. The Indian crude is a mix of Dubai and Brent crude in the ratio of 61:39.
After meeting Chidambaram, Deora said oil prices have gone up “so much that we need to find a solution”. He said revenue losses of the companies would be around Rs 70,000 crore, if crude prices remained above $90 per barrel for the rest of the year.
Deora is believed to have suggested a marginal rise in the prices of petrol and diesel, a cut in customs duty and an issue of fresh oil bonds.
However, it is unlikely that the government will force consumers to share the burden of the price rise because of the coming assembly polls in Gujarat and Himachal Pradesh.
Besides, the Left parties would have savaged the government in the winter session of Parliament that starts within a fortnight.
Sources said the oil ministry justified the price hike on the grounds that it was eight months since it last raised prices by Rs 2 for petrol and Rs 1 for diesel.
Deora also suggested fresh oil bonds over and above what had been cleared by the Union cabinet. The government had worked out a package to take care of two-thirds of the Rs 55,000-crore revenue loss to the companies. However, under-recoveries have since mounted.
In the package, the government planned to compensate the three oil marketing companies — Indian Oil, Hindustan Petroleum and Bharat Petroleum — 43 per cent of their projected revenue loss from the sale of petrol, diesel, domestic cooking gas and PDS kerosene through bonds.
Besides, 35 per cent of the loss will be borne by upstream firms ONGC, GAIL (India) and Oil India Limited.
The burden of the residual loss will fall on the oil marketing companies.
They have been losing Rs 3.90 a litre on petrol, Rs 6.22 on diesel, Rs 15.99 on kerosene and Rs 174.17 on every LPG cylinder.
Indian OIl chairman S. Behuria had warned that under- recoveries would shoot up to Rs 121 crore a day from November, if the prices were not revised.
Oil fell on Thursday as investors cashed in on a new peak of $96 a barrel struck following a sharp decline in US crude stocks and the US Federal Reserve’s interest rate cut the previous day.
New York crude had earlier closed in on an inflation-adjusted high of $101.70 hit in 1980.
US oil rose as high as $96.24 a barrel before retreating to $94.08, down 45 cents, by 1644 GMT. Brent crude also struck a record $91.71 before dropping to $90.21, down 42 cents.