The Hindu Business Line : ONGC, Gail, OIL told to pay Rs 1,200 cr to marketing cos

THE Government has directed Oil and Natural Gas Corporation (ONGC), Gail (India) Ltd and Oil India Ltd (OIL) to pay Rs 1,200 crore to the public sector oil marketing companies.

The payment is towards sharing a third of the losses incurred by Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and IBP Ltd on sale of LPG and kerosene during the first quarter of the current fiscal.

The losses are a direct result of the Government's tacit intervention to restrain the oil marketing companies from raising prices of kerosene and LPG even as the global price of the products have been soaring in line with hardening global crude oil price.

While ONGC will pay out Rs 800 crore, Gail will bear a burden of around Rs 250 crore and OIL the remaining Rs 150 crore. In turn, IOC (including IBP Ltd) will receive around Rs 600 crore, while BPCL and HPCL will gain by around Rs 300 crore each.

The sum of Rs 1,200 crore to be paid by ONGC, Gail and OIL is a third of the Rs 3,600-crore losses suffered by the oil marketing companies during the first quarter of the current fiscal.

Last year, the Government directed ONGC and Gail to bear a third of the losses incurred by the oil marketing companiesfor the entire year. This dented ONGC's bottomline, which took a major portion of the blow, by Rs 2,670 crore. Gail paid out another Rs 400 crore.

Over the last month, the industry has witnessed a tussle between ONGC and the downstream companies on the fate of the LPG and kerosene under-recoveries.

ONGC argued in vain that it was already taking a beating in the natural gas business, where it is selling gas at a loss at $1.10 per million British thermal units since the price is capped by the Government. It termed the concept of sharing of the LPG, kerosene burden as an act of "donation."

The oil marketing companies recently argued that their finances were in a fragile state owing to the LPG and kerosene burden. BPCL and IBP indicated that they would be posting a loss in the first quarter.

IOC, the largest refiner, said it would post a profit of Rs 1,300 crore while HPCL said that it would record a net profit of Rs 90 crore.