New Delhi: The finance ministry has offered less than half of the Rs31,700 crore sought by the oil ministry to make up for revenue losses incurred by state-owned retailers on sale of liquefied petroleum gas (LPG) and kerosene.

Large tab: An HPCL outlet in Faridabad, Haryana. Refining firms are estimated to lose about Rs45,000 crore selling fuel below cost. Rajkumar / Mint

Petroleum minister Murli Deora on Thursday met finance minister Pranab Mukherjee to seek compensation for the public sector oil firms for their losses, but the meeting remained inconclusive.

“No decision was taken," Deora said after the 75-minute meeting.

Persons familiar with the matter said the main issue was how much of the revenue loss the government should bear.

The finance ministry feels that the current year is not an “exceptional" period when global oil rates have been at a moderate level and so the 2006-07 formula of the government picking up one-third of the revenue loss on fuel sales should apply.

Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd are projected to lose about Rs45,000 crore on selling petrol, diesel, domestic LPG and kerosene below cost. The finance ministry is willing to meet one-third of this by way of either cash or bonds, they said.

India, Asia’s third largest energy consumer, sets prices of petrol, diesel and cooking gas to curb inflation and currently compensates refiners by issuing bonds and requiring state-run explorers, led by Oil and Natural Gas Corp. Ltd, to supply them crude oil at a discount. China, which also controls fuel prices, has a mechanism to adjust them when crude costs change by more than 4% over 22 consecutive working days.

If the government believes fuel prices have to be subsidized, they should bear the burden, said Apurva Shah, head of research at brokerage firm Prabhudas Lilladher.

Oil secretary R.S. Pandey had said on Wednesday that state refiners may lose Rs45,000 crore in the year ending 31 March selling fuel below cost.(‘Bloomberg’ contributed to this story.)