Oil companies will be adequately compensated: Govt

Public sector oil marketing companies (OMCs) would be adequately compensated by the Government for selling fuel products at a discount, Petroleum Secretary S. Sundareshan said. The revenue loss to the OMCs would be adequately and fully addressed, Sundareshan said today at a hurriedly called media conference in the capital. His remarks came a day after the Empowered Group of Ministers (EGoM) on fuel prices was postponed indefinitely. The panel was to take up an increase in diesel and LPG prices. The EGoM has been considering a price hike of Rs 2 per litre on diesel and Rs 30-40 per LPG cylinder. OMCs currently sell diesel at a loss of Rs 6.09 per litre and domestic LPG at Rs 272.19 per cylinder. Sundareshan refused to comment on the reason for the postponement of the EGoM.



"An impression seems to have been generated that since the EGoM has been postponed, and the under-recoveries (or revenue loss) will be left unattended. This is totally incorrect," he said. The EGoM was postponed in view of the spiraling food prices. Any increase in diesel prices tends to have a cascading effect on the economy and pushes up inflation across the board. The Finance Ministry will not restrict itself to compensating the OMCs for one-third of their revenue loss, Sundareshan said. It would reimburse them on the basis of their actual under-recoveries.

"The under-recoveries of OMCs will be adequately and fully addressed by the burden-sharing mechanism, wherein the revenue loss is partly made up by upstream firms, partly by the Government and if possible, a small portion is borne by the OMCs themselves," Sundareshan said. Indian Oil Corp. (IOC), Bharat Petroleum Corporation Ltd. (BPCL) and Hindustan Petroleum Corporation Ltd. (HPCL) currently lose over Rs 2.25bn per day on selling diesel, LPG and kerosene below their imported cost.