Date:07/07/2005 URL: http://www.thehindubusinessline.com/2005/07/07/stories/2005070702650100.htm

Back `Private oil cos may be asked to bear part of subsidy burden'

Our Bureau

New Delhi , July 6

THE Petroleum Ministry is likely to ask private oil companies and standalone refineries to bear a portion of the burden on subsidised retail fuel prices.

The Ministry proposes to ask private and other oil companies to pay about Rs 1,500 crore, official sources said, adding that negotiations on this issue are going on.

A mechanism to share the subsidy should be ready by July 15, a Petroleum Ministry official said. He said that Reliance and other standalone refiners — MRPL, CPCL and KRL — are also being asked to share the losses, as they had gained hugely through the rise in refining margins. From this year onwards, the revenue loss on petrol and diesel will also be shared, which was not the case till last year. Upstream firms — ONGC, OIL and GAIL, till last year, were sharing LPG and kerosene under-realisations only.

"This is an ad-hoc measure and we have to devise a new pricing policy. Maybe, we need to shift from the present policy of pricing domestic products at the levels of imported cost to a policy where they are priced at the cost of exports," the official said.

He added that HPCL, BPCL and IBP would post net loss in the first quarter of this year (2005-06) even after ONGC, Oil India Ltd and GAIL pick a Rs 4,000-crore subsidy bill on the four products — LPG, kerosene, petrol and diesel.

The under-realisation on petrol and diesel during the first quarter (April-June) of 2005 is Rs 4,700 crore and on LPG and kerosene, it is Rs 4,800 crore. Of this, about Rs 4,000 crore will be contributed by ONGC, GAIL and Oil India, he said. ONGC may be asked to pick up almost 90 per cent of the subsidy, while GAIL's share may go down substantially.