More Bonds to Cover 50% of Oil PSUs' Losses
Posted on: Thursday, 15 May 2008, 00:00 CDT
NEW DELHI: The finance ministry has agreed to raise the quantum of bonds - Centre's IoUs - to state-run oil marketing companies to make up half the losses they suffered in 2007-08 from selling motor and kitchen fuels at artificially low prices set by the government.
This marks a half-way solution between the oil ministry's demands for bonds to cover 57% of the losses and the 42.7% decided originally as part of the Centre's burden-sharing formula to spread the impact of flaring global crude prices among refiner-marketers, oil producers and marketing firms.
The decision came at a meeting between oil minister Murli Deora and finance minister P Chidambaram on Tuesday.
The finance ministry, which agreed on Rs 70,579 crore as the size of losses for the purpose of compensation, will be issuing bonds worth approximately Rs 35,300 crore. As of now, bonds worth Rs 20,333 crore have been issued for the losses in the April-December 2007 period, which leaves about Rs 15,000 crore more to be covered.
"We asked (for covering) 57.1% (of losses with) oil bonds. And they are not ready for it. So we have requested him (finance minister) to issue as much as possible," Deora said after meeting Chidambaram. He said there was no discussion on raising pump prices as it is a "policy decision which could be decided only by the Cabinet".
The two ministers also did not discuss whether the bonds would be taken as mandatory requirement for banks to park their funds in government securities, known as statutory liquidity ratio. Oil minister said that he was not planning to meet PM Manmohan Singh on the bond issue.
State refiners-marketers Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum are incurring huge losses in revenue because of high global crude prices that hit a record $126.40 a barrel on Monday. During 2006-07, the government had compensated 42.7% of the revenue losses of state oil refiners and issued bonds worth Rs 21,210 crore.
Crude prices are up more than three-quarters since mid-2006, topping a record $126 a barrel this week but pump prices have been raised only once, by Rs 2 a litre of petrol and Re 1 per litre of diesel, in February.
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Source: The Times of India
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