Date:23/06/2006 URL: http://www.thehindubusinessline.com/2006/06/23/stories/2006062302960900.htm

Back No compensation for private oil cos: Ministry

Richa Mishra

Private players voice concern over sale at controlled price

Same treatment
RIL has requested the Ministry to treat it on par with PSU oil marketing companies, while working out a compensation policy for retail companies over the losses incurred in selling these products below cost price.

New Delhi , June 22

The Petroleum Ministry has turned down the request of private oil companies such as Reliance Industries Ltd (RIL) for compensating them on their under-recoveries from sale of motor spirit (MS) and high speed diesel (HSD). Sources told Business Line that the Government has decided not to consider the request, as the private companies were free to decide on the retail price of these petroleum products.

Private oil players such as RIL and Essar were voicing similar concerns to those of state-owned oil marketing companies (OMCs) over the sale of petroleum products at a controlled price, despite the surge in international crude prices.

According to sources, RIL has requested the Petroleum Ministry to treat it on par with PSU OMCs, while working out a compensation policy for retail companies over the losses incurred in selling these products below cost price. The company is said to have informed the Ministry that it had incurred under-recovery of Rs 1,187 crore in 2005-06 on the two products. While the under-recovery on MS was Rs 103 crore, on HSD it stood at Rs 1,084 crore for the fiscal.

While for similar under-recoveries PSU OMCs are compensated by the Government through oil bonds or discounts from upstream companies, no such mechanism is available for private oil companies, they argued.

RIL was granted marketing rights for petroleum products in May 2002.

The authorisation, however, does not envisage a situation where the Government would intervene and disallow adjustment of domestic prices in line with international prices of crude and petroleum products, sources said.

In fact, RIL had recently increased the price of diesel and petrol sold through its retail outlets. It had increased the price of diesel by Rs 2 per litre plus local taxes on May 22.

With effect from May 12, the company had increased the price of domestic petrol by Rs 2 per litre plus local taxes.