Oil minister Jaipal Reddy in New Delhi on Friday. Picture by Prem Singh
New Delhi, June 24: Fridays triple whammy — the hike in diesel, kerosene and cooking gas prices — wont ease the burden of under-recoveries on PSU oil marketing companies Indian Oil, BPCL and HPCL by very much.
Petroleum minister Jaipal Reddy said at a late night press conference that the under-recoveries prior to the hike were forecast at Rs 1,71,140 crore this year for the three products. Reddy said the oil companies would be able to claw back Rs 21,000 crore — and that would still leave them with under-recoveries of Rs 1,20,000 crore.
There still will be under-recoveries (losses) even after the price hike and duty cuts, Reddy said.
Besides the price hike, the empowered group of ministers has abolished the 5 per cent customs duty on crude oil and slashed the same on diesel and petrol by 2.5 per cent from 7.5 per cent.
Also, excise duty on diesel was cut from Rs 4.60 per litre to Rs 2 a litre.
The ministerial panel also took into consideration the huge market borrowing of Rs 120,000 crore of the oil marketing companies; continued indecisiveness on the part of the government could have hurt their ability to import crude.
Oil ministry sources said, The finances of oil firms are a matter of grave concern and the debt burden has crossed Rs 120,000 crore. Soon they will not have the cash to import crude and the country will face fuel shortage, if the decision had been prolonged.
The country imports about 80 per cent of its crude requirements. India imported crude oil at $113.69 a barrel in the first quarter of the current financial year against $85 a barrel in the same period previous year.
I have taken the risk of reducing the duties so that relief can be given to consumers… it is hoped that the state governments would also reduce the state levies to a corresponding extent, finance minister Pranab Mukherjee said.
The revenue loss of the oil firms would have to be met through a combination of cash subsidy from the government and contribution from upstream firms such as ONGC Ltd. However, Reddy said no decision had been taken about their respective shares.
Petroleum secretary G.C. Chaturvedi said oil firms were losing Rs 13.72 per litre on diesel; the price hike together with the customs duty and excise duty cuts would lower the revenue loss to Rs 6.22 per litre.
During 2010-11, fuel retailers had a combined revenue loss of Rs 78,189 crore. Of this, Rs 30,297 crore, or 38.75 per cent, was met by upstream oil producers such as ONGC. The government gave a cash subsidy of Rs 41,001 crore, or 52.44 per cent.
In the budget, Mukherjee had provided Rs 23,640 crore towards fuel subsidies against Rs 38,380 crore in the previous year.