Pay us, or no tax: oil firms to Govt
Oil majors seek deferment of excise duty payments and monthly issuance of bonds. Gaurav Choudhury reports.business Updated: Aug 24, 2008 20:16 IST
Faced with fast depleting working capital reserves, state-owned oil marketing companies have proposed a slew of measures, including deferment of excise duty payments and monthly issuance of pending bonds to tide over a possible liquidity crisis.
The three marketing and refining majors — Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) — have also proposed that they be allowed to pay provisional advance tax only on cash profit, excluding oil bonds in the coming quarters.
In a meeting with Petroleum Minister Murli Deora last week, top executives of the three companies have also sought direct foreign exchange loan assistance of $4 billion from the Reserve Bank of India pending issuance of oil bonds.
The three state-run retailers are given oil bonds by the government to compensate them for about a half of their under-recoveries — the notional revenue loss on the sale of petrol, diesel, domestic LPG and kerosene at prices lower than those mandated by international crude prices.
A top official said the companies have received oil bonds only up to the quarter ended December 2007, all of which have been liquidated in June through special market operations of the central bank.
The RBI had, in its credit policy review on July 29, ended the special market operations of giving the three companies the foreign exchange to buy crude oil in exchange of oil bonds.
These companies are yet to receive bonds worth Rs 39,363 crore for the quarters ended March and June 2008.
The official said the petroleum ministry is pushing for immediate revival of special market operations to shore up working capital funds for the retailers.
In June, the government announced a mix of bonds, duty cuts and price hike to prop the crippling finances of oil marketing companies. Oil bonds worth Rs 94,600 crore are expected to be issued during the current financial year.
The official said that oil companies have sought issuance of oil bonds on a monthly basis from October 2008 and deferment of excise duty payments without any interest or penalty.
Oil bonds are estimated to meet 56 per cent of the gross under-recoveries of oil companies.
Earlier this month, the RBI allowed IOC to use its proposed 15 million tonne Paradip refinery’s Rs 20,000 crore credit line for meeting its working capital requirement.
IOC was on the verge of exhausting its borrowing limit of Rs 45,000 crore.
The other two oil-marketing companies, HPCL and BPCL, have also sought raising their borrowing limits by Rs 2,500 crore and Rs 3,000 crore, respectively.