Oil bailout in pipeline

New Delhi, Oct. 8: Prime Minister Manmohan Singh today met finance minister P. Chidambaram and petroleum minister Murli Deora to discuss the possibility of marginally increasing petrol and diesel prices and issuing bonds to oil marketing companies. The public sector oil retailers are making losses because of a rise in crude oil prices in global markets.

The high-level meeting also discussed how the excise duty structure of diesel could be restructured.

Crude oil prices have touched $80 a barrel, and the companies are losing Rs 185 crore daily by selling petrol, diesel, domestic cooking gas (LPG) and kerosene below the cost price.

Losses to the companies are Rs 2.81 a litre on petrol, Rs 4.68 a litre on diesel, Rs 15.50 a litre on PDS kerosene and Rs 178 per LPG cylinder.

“Unless the government acts, the net worth of the companies will be eroded soon,” a senior official said.

Singh, during a recent cabinet meeting, had sought a status report on the revenue losses of the companies. The companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — are projected to lose Rs 53,200 crore in revenues in this financial year.

The official said the oil ministry wanted the finance ministry to bear half of the losses through oil bonds and lower excise duties. It may not be possible to bear the full extent of the loss because of political repercussions of a hike.

“The best bet should be a combination of oil bonds and minor cut in excise duties,” the official said.

He did not rule out a small hike in petrol and diesel prices.