The Hindu Business Line : Govt wants all players in oil sector to bear subsidy burden

WITH no legal backing to rope in the petroleum refining companies to share the subsidy burden on petroleum products, the Government is working with the oil companies to evolve a mechanism which would result in equal sharing of subsidy burden among all petroleum sector players, including domestic and private refining companies like Reliance Industries Ltd.

Confirming the development to newspersons on the sidelines of a conference here today, the Petroleum Secretary, Mr S.C. Tripathi, said that every stakeholder had to bear the burden of subsides for LPG and kerosene. The Government was working on this policy for equitable sharing of under-recoveries on LPG and kerosene between oil marketing companies (OMCs), upstream firms and stand-alone refineries.

"We don't have the legal mechanism to enforce subsidy sharing so we are persuading the companies to do so. We have asked the companies to discuss among themselves and come out with a formula," Mr Tripathi said, adding that the new under-recovery sharing scheme would come into effect from this quarter after private refiners were persuaded.

At present only State-run oil exploration companies and OMCs share the burden of LPG and kerosene subsidies, which is expected to total Rs 5,000 crore in the first 45 days of the current financial year. The Government subsidises petroleum products to keep inflationary pressures under control, especially kerosene and LPG, widely used as cooking fuel in the country.

Until now, the revenue loss on LPG and kerosene was being equally divided between OMCs — Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation — and upstream firms — Oil and Natural Gas Corporation, Oil India Ltd and GAIL (India) Ltd.

Refiners such as private sector Reliance Industries and standalone refineries such as Mangalore Refineries and Petrochemicals Ltd (MRPL), Kochi Refineries Ltd (KRL), Chennai Petroleum Corporation Ltd (CPCL), Bongaigoan Refinery and Petrochemicals Ltd (BRPL) and Numaligarh Refinery Ltd were out of the purview. "We plan to bring refiners also in the sharing scheme," he said, but did not give details.

The Government has been examining if the revenue loss on petrol and diesel should be shared in the same formula as LPG and kerosene. Petrol and diesel are being sold at over Rs 5 per litre loss, the impact of which cumulatively would be Rs 23,400 crore for the full 2005-06 fiscal.

OMCs had on March 1 frozen the refinery transfer price (RTP), which is the price at which they lift products from the refineries. For petrol and diesel, the RTP was frozen on March 15. Refiners are getting the March price for their products and not the current import-parity price.

"We are still in the process of discussing and hope to come up with a policy by end of this month," he said.

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