The Government has decided to absorb a major part of the steep hike in global crude oil prices by issuing Rs 23,457.24 crore worth of oil bonds, which constitutes 42.70 per cent of the Rs 54,935 crore anticipated revenue loss on account of freezing fuel prices.
The Cabinet on Thursday also decided to extend the existing subsidy schemes for cooking gas and kerosene for three more years with retrospective effect from April 1, 2007. The government provides around Rs 2,900 crore from the Budget to subsidise these household cooking fuels.
With these initiatives, the government will not increase prices of petrol, diesel, kerosene and liquefied petroleum gas.
The retail prices of petrol and diesel were reduced by Rs 2 and Re 1 a litre, respectively, in mid-February. While revising the prices, the government had set a benchmark of $56 a barrel of the crude oil basket India buys in the global market. The Indian crude oil basket currently hovers above $75 per barrel.
“We have kept our promise of not raising prices of sensitive petroleum products,” Petroleum Minister Murli Deora said after the Cabinet decision.
Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum will get oil bonds worth Rs 23,457.24 crore. The first tranche of Rs 11,800 crore, to compensate for losses in the first half of 2007-08, will be issued next week.
Officials said 35 per cent, or Rs 19,227.25 crore of the total under-recovery would be borne by upstream firms ONGC, GAIL and Oil India Ltd. Last year, upstream oil firms contributed Rs 20,507 crore. The rest of the under-recovery would be borne by Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum.
According to estimates, Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum are losing Rs 4.34 on every litre of petrol sold, Rs 6.90 on diesel, Rs 15.95 on kerosene headed for ration shops and Rs 175 on a cylinder of cooking gas.
During 2007-08, public sector oil firms lost around Rs 52,162 crore on sale of petrol, diesel, cooking gas and kerosene.
Prime Minister Manmohan Singh had met Deora and Finance Minister P Chidamabaram earlier this week to decide on the issue of providing relief to the oil marketing companies, which were suffering losing Rs 190 crore a day on sales of these fuels.