The increase in retail price of petrol and diesel by Rs.2 and Re. 1 per litre would reduce the revenue loss (under recovery) of public sector oil marketing companies by Rs. 840 crore in the remaining six weeks of the current financial year. In spite of the price increase, the under recovery on petrol is Rs. 7.25 per litre, Rs. 9 for a litre of diesel, Rs. 19.89 in kerosene and Rs. 331 for a 14.2 kilogram cylinder.
The government estimates under recoveries in the current financial year to be Rs. 71,800 crore. The increase in revenue from the hike in petrol and diesel prices constitutes a bare 1.2 per cent of the under recoveries.
Sources said Finance Minister P Chidambaram opposed the petroleum ministry's demand for a Re one per litre reduction in excise duty on petrol and diesel.
Petroleum secretary MS Srinivasan said the under recoveries would have touched Rs. 90,000 crore, but for the appreciation of rupee against dollar and increase in gross refining margin in the firt eight months of the current financial year.
The upstream companies – Oil and Natural Gs Corporation, Oil India Ltd and GAIL (India)—would be contributing Rs. 24,000 crore in cross subsidy burden sharing to Indian Oil Corporation, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).
The government will issue bonds to the tune of Rs. 57,000 crore, constituting 42.70 per cent will be issued by the finance ministry before the end of the financial year.
Indian Oil Corporation chairman Sarthak Behuria said the increase in prices of diesel and petrol would substantially reduce the bonds in the next financial year. The oil bonds will also enable the oil companies to meet their working capital requirements.
“IOC, BPCL and HPCL have major expansion plans. IOC’s own capital expenditure is in the vicinity of Rs. 10,000 crore per year,” Behuria added.
Srinivasan said duty cuts and oil bonds were among the options available to the government. “We were concerned about getting relief for the oil PSUs. Whether it is through excise duty cut or oil bonds is not material,” he stated.