Govt decides to shoulder half of OMCs’ under-recoveries

Finance minister P Chidambaram impressed upon petroleum minister Murli Deora to accept a lower under-recoveries figure with a promise to cover half of it through the issue of government bonds. Last October, the government agreed to bear only 42.7 per cent of the under-recoveries through oil bonds. The annual loss, revised from recently estimated Rs 79,000 crore, was arrived at by a Joint Study Group comprising the Cost Accounts wing of the Finance Ministry and the Petroleum Planning & Analysis Cell. The reduction was achieved by considering ex-refinery product prices at cost.

This would lower the burden on the Finance Ministry as it would have to shell out extra bonds worth Rs 14,957 crores as it has already issued bonds of Rs 20,333 crores. But OMCs expect the fourth quarter to result in a “no profit, no loss” situation with this move.

Deora had asked Chidambaram to issue oil bonds to partially cover the Rs 79,000-crore loss by the OMCs due to a spike in global crude oil prices. Crude touched a record high of $126.20 a barrel before trading at $123-level. India’s import cost has also jumped with the rupee trading at a 13-month low.