Oil PSUs may get cash compensation: Govt

Public sector oil companies - IOC, BPCL and HPCL - may get compensated in cash for selling oil products below the cost instead of oil bonds, Petroleum Secretary R. S. Pandey said. "Most likely it subsidy is going to be cash," Pandey told reporters in New Delhi after a meeting with Finance Minister Pranab Mukherjee. He said that no decision had been taken on the quantum of compensation to be given by the Finance Minister. "Discussions were held and we hope to hear from them soon," Pandey said. The Petroleum Ministry had sought Rs200bn of oil bonds for public sector oil firms as compensation for FY10, as crude oil prices have started inching higher, S. Sundareshan, the No. 2 official in the Petroleum Ministry, had said last month.

The Ministry of Finance and the Ministry of Petroleum & Natural Gas have a difference of opinion on the amount of compensation. The Petroleum Ministry had asked for a compensation of Rs200bn for the three quarters. Estimates are that losses for the OMCs will zoom up to Rs450bn by the end of this fiscal year if crude oil prices remain at the current region of US$80 per barrel. The leading state-run oil marketing companies are set to post losses in the third quarter as well if the compensation is not announced soon. The Finance Ministry is not interested in giving oil bonds due to the pressures on fiscal deficit. At the same time, a price hike looks unlikely as of now, as it would add to inflation.