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Now, CAG to audit revenue losses of oil firms

After oil and gas field contracts, the Comptroller and Auditor General (CAG) wants to audit huge under-recoveries or revenue losses reported by state-run oil retailers on the sale of diesel and cooking fuels. Loss diary

business Updated: Sep 03, 2012 03:05 IST

After oil and gas field contracts, the Comptroller and Auditor General (CAG) wants to audit huge under-recoveries or revenue losses reported by state-run oil retailers on the sale of diesel and cooking fuels.

Indian Oil Corp (IOC), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) sell diesel, domestic cooking gas (LPG) and PDS kerosene at government-controlled rates that are way below market price.

The difference between the retail sale price and market rates is reported as under-recovery or revenue loss.http://www.hindustantimes.com/Images/Popup/2012/9/03_09_12-buss19d.jpg

“The CAG has requested for auditing the under-recoveries of oil marketing companies (OMCs). We have told them they are most welcome to do so,” an oil ministry official said. “It will be a performance audit.”

Oil companies price fuel at “trade parity price” which is made up of 80% of the actual cost of import of fuel at a port, and the remaining 20% being the price realised if the fuel were to be exported.

IOC, HPCL and BPCL are likely to end the fiscal year with a revenue loss of Rs 1,92,951 crore, of which the government would have to bear Rs 115,770 crore.

In 2011-12, the government provided R83,500-crore cash subsidy to meet over 60% of the Rs 1,38,500 crore revenue loss. Upstream firms like ONGC chipped in Rs 55,000 crore.

“Considering the huge subsidy outgo, the CAG rightly wants to audit the way under-recoveries are calculated,” the official said.