A day after a ministerial meeting on fuel prices was postponed indefinitely, the Oil Ministry on Thursday said the government is committed to compensating state-owned firms for the revenue lost on selling fuel below cost.
Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp currently lose over Rs. 225 crore per day on selling diesel, domestic LPG and kerosene below their imported cost, with global crude oil prices at a two-year high of USD 92 a barrel.
At a hurriedly called media conference, Oil Secretary S Sundareshan said the revenue loss of the oil marketing companies (OMCs) "would be adequately and fully addressed."
Oil Minister Murli Deora is believed to have been instrumental in postponing Thursday's meeting of the Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee, as he felt a price hike at the present juncture would further fuel inflation.
Sundareshan, however, refused to comment on the reason for postponement of the EGoM meet to consider a price hike of Rs. 2 per litre of diesel and Rs. 30-40 per LPG cylinder.
Oil firms currently sell diesel at a loss of Rs. 6.09 per litre and domestic LPG at Rs. 272.19 per cylinder.
"An impression seems to have been generated that since the EGoM has been postponed, the under-recoveries (or revenue loss) would be left unattended. This is totally incorrect," he said.
Deora and Mukherjee had a meeting in Haldia on December 25 on the issue, he said, adding that the Finance Ministry will not restrict itself to compensating the oil companies for one-third of their revenue loss on the basis of the Rs. 68,361 crore estimate made earlier by the government. Rather, it would reimburse the oil marketing companies on the basis of their actual under-recoveries.
"The under-recoveries of OMCs would be adequately and fully addressed by the burden-sharing mechanism, wherein the revenue loss is partly made up by upstream firms, partly by the government and if possible, a small portion is borne by the OMCs themselves," Sundareshan said.
Upstream firms Oil and Natural Gas Corp (ONGC), Oil India and GAIL India will shoulder 33% of the oil marketing companies' subsidy burden, while the Oil Ministry is pitching for half of the revenue loss to be provisioned for in the Budget.
The Finance Ministry had previously stated that it would make up for only one-third of the revenue loss, but Sundareshan on Thursday said there was "no insistence by the Ministry of Finance that they will not give more than one-third."