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Journalism of Courage
The heads of the three state-run oil marketing companies (OMCs) on Friday painted a grim picture for the country if the government did not raise prices of auto fuels soon. But Prime Minister Manmohan Singh’s indication to petroleum minister Murli Deora was that it would be a while before a decision could be reached.
Deora met the chairmen-cum-managing directors Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) who apprised the minister that they would lose close to Rs 2,00,000 crores in the next 10 months putting a strain on their ability to pay for crude oil which has now crossed $130 a barrel.
They explained that the government would have to decide within a month the steps to compensate them in real money for their under-recoveries or else it would become difficult to sustain product supplies.
Addressing reporters after the meeting, petroleum secretary M S Srinivasan said, “The situation is getting to be alarming. We need to stem the rot in the beginning.” Srinivasan said the ministry was suggesting a combination of price hike and duty cuts. “The price hike is inevitable,” he said.
The government, which has barred OMCs from raising prices, has been issuing bonds that mature in 2025 to offset half the losses with state-run oil and gas companies absorbing 36.3 per cent. But the promissory paper has not helped. Faced with a daily loss of Rs 500 crore in fuel sales, the three are borrowing Rs 3,500 crore a month and will see their borrowing limits run out by September.
“Our fiscal situation has reached a crisis point with West Asian crude producers declining to extend the credit line. Issuing bonds would not help,” they told Deora, said an official present at the briefing.
The PM, later briefed by Deoara about the fiscal distress of the OMCs, asked his principal secretary T K A Nair to thrash out the possibilities with OMC heads and the secretaries of finance and petroleum ministries. At the meeting, the petroleum team highlighted the three-pronged strategy of raising petrol and diesel prices, reducing customs and excise duties, and deferring the excise duty payment by the OMCs by six months.
Finance Ministry officials, however, made it clear to Nair that any cut in excise and customs duty had to be ‘revenue-neutral’ considering the expenditure committed to various development schemes in the Budget.
