Transparency must in compensating OMCs

Petroleum secretary said it is not the correct market time to sell stake in PSUs

Petroleum ministry on Wednesday said a transparent mechanism for

compensating oil-marketing companies (OMCs) for under-recoveries

is

need of the hour to maintain their financial health.

“The challenge before us is to ensure that OMCs do not suffer

under-recoveries,” petroleum secretary S Sundareshan said at

International Symposium on fuels and lubricants.

Country’s largest OMC, Indian Oil Corporation (IOC) and its peers —

Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum

Corporation (HPCL) — are losing more than Rs 190 crore everyday by

selling fuel below market cost. At present, petrol is sold at a loss

of Rs 4.97 a litre, diesel at Rs 3.27 a litre, kerosene at Rs 16.91 a

litre and cooking gas at a loss of Rs 267.39 per 14.2 kg cylinder.

There is a need for realistic pricing of petroleum products to prevent

companies suffering due to under- recoveries, Sundareshan said adding,

“It will be impossible for the companies to fund expansion projects.”

Government is yet to take a final call on implementation of Kirit

Parikh panel recommendations deregulating retail rates of both diesel

and petrol along with hike in prices of kerosene and cooking gas.

IOC has already decided to go ahead with projects that have a higher

internal rate of return (IRR) and go slow on those that are unlikely

to generate much revenue. “Projects with more than 15 per cent of IRR

will be put on fast track,” B M Bansal, chairman of IOC earlier said.

The Paradip refinery project and the nuclear initiative with Nuclear

Power Corporation of India (NPCIL) are some of the projects that IOC

will try to speed up. On the other hand, it will go slow on the

petrochemical projects in Orissa and Gujarat.

Meanwhile, the secretary said it is not the correct market time (to

sell a stake) anyway. “There is no serious consideration at this

juncture,” said Sundareshan. There were rumours that government may

sell stake in country’s largest upstream company, Oil and Natural Gas

Corporation (ONGC) and IOC.

Government holds 74.14 per cent stake in ONGC, while it owns 78.92 per

cent of IOC.

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