Mumbai: The Government is expected to come up with a decision in the next 3-4 days on compensation to be given to state-run oil marketing companies who incur losses by selling fuel below market rates, a senior industry official said.
Refiners Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) currently sell petrol at a loss of Rs3.06 a litre, diesel at Rs1.56 per litre, kerosene at Rs17.23 per litre and LPG at a discount of Rs299.01 per cylinder.
Petroleum minister Murli Deora and finance minister Pranab Mukherjee met in the national capital on Thursday to discuss revenue losses that state-run retailers were incurring by selling auto and cooking fuel at subsidised rates.
“The immediate worry is the under-recoveries of these marketing companies and how they are to be met. Based on the discussions yesterday, some clarity has come. I do expect a definite decision on this within the next 3-4 days,” ONGC chairman and managing director, R S Sharma, told reporters on the sidelines of a conference.
To make good these losses, the Government had formulated a subsidy-sharing mechanism whereby one-third of the under-recoveries are to be compensated by upstream firms like Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) as well as through oil bonds.
While the petroleum ministry has sought oil bonds worth Rs31,700-crore, the Finance Ministry has offered less than half of this amount.
This led Deora to propose freeing petrol prices and gradually increasing diesel rates at an oil sector review meeting called by Prime Minister Manmohan Singh.
Sharma said the Prime Minister has “taken stock of the situation” and observed that the needs of oil marketing companies need to respected.
“The short-term solution will be given right now and the long-term solution will come after recommendations of the Kirit Parikh Committee. Let the decision come from designated authorities,” Sharma said.
The Centre had in September last year set up an expert committee to suggest reform in the pricing of oil products.
The Committee headed by Planning Commission member, Dr Kirit Parikh, is expected to give recommendations by this month-end.
Sharma said ONGC has requested the Government to give adequate incentives for investments in exploration of hydrocarbons in its pre-Budget memorandum.