Oil marketing firms may get more compensation
The finance ministry may offer more compensation to state-owned oil marketing companies (OMCs) for selling fuel below cost this year, provided the oil ministry deregulates auto fuel prices and increases cooking fuel prices next fiscal.
Public sector OMCs — Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) — may get this year’s dues in the next financial year after the Budget session of Parliament, two ministers said, on condition of anonymity.
“A fuel price hike is imminent, but may happen only in 2010-11. Finance ministry is not in a position to continue paying huge subsidies on four petroleum products,” one of them said.
The finance ministry has budgeted only Rs 3,108 crore as kerosene subsidy in 2010-11, substantially lower than Rs 14,954 crore in 2009-10. It wants the Kirit Parikh committee report to be implemented.
On February 2, the Kirit Parikh committee recommended freeing of petrol and diesel prices and raising kerosene and cooking gas prices by Rs 6 a litre and Rs 100 per cylinder with immediate effect. The government had mandated the committee to find viable ways for pricing of petroleum products.
However, the oil ministry is not in a position to implement the committee’s recommendation after higher duties in the Budget made petrol costlier by Rs 2.71 a litre and diesel by Rs 2.55 a litre.
“If auto fuels are deregulated today, prices of petrol and diesel will jump by over Rs 6 a litre and Rs 4 a litre (respectively) ... We should wait for softening of international crude oil prices,” he said. The oil ministry expects OMCs to get another Rs 19,000 crore as compensation for 2009-10. The finance ministry has budgeted only Rs 12,000 crore as cash compensation for selling cooking fuels below cost, as against the OMCs demand of Rs 31,000 crore.
OMCs will incur an additional revenue loss of around Rs 14,000 crore on retail sale of petrol and diesel this financial year, which will be met by state-owned upstream companies ONGC, OIL and Gail India.