Inter-ministerial panel to look into OMC losses

The government has formed an inter-ministerial panel headed by Finance Minister Pranab Mukherjee to find ways to compensate the oil marketing companies for Rs 19,000 crore worth of losses on account of subsidised sale of kerosene and domestic LPG in 2009-10.

In the current year, the oil marketing companies (OMCs) — Indian Oil, Bharat Petroleum and Hindustan Petroleum — are likely to incur losses worth Rs 98,000 crore. Other members of the panel will be Petroleum Minister Murli Deora, Agriculture Minister Sharad Pawar, Railway Minister Mamata Banerjee and Power Minister Sushilkumar Shinde, said an oil ministry official.

While the OMCs purchase crude oil at international prices, the sale prices of products like petrol, diesel, kerosene and LPG are not maintained in line with the international prices. Currently, the OMCs lose Rs 5.57 on every litre of petrol they sell, while the loss on every litre of diesel and kerosene is Rs 4.84 and Rs 17.58, respectively. They are also losing Rs 265 on every cylinder of domestic LPG.

The OMCs’ under-recovery on the sale of these products is estimated to be Rs 46,051 crore during 2009-10. Under the burden-sharing mechanism for 2009-10, the public sector upstream oil companies will fully compensate the loss on petrol and diesel. The loss on kerosene and LPG is supposed to be made good by the government. However, of the Rs 31,620 crore losses estimated on account of kerosene and LPG, only Rs 12,000 crore have been compensated.

So far no mechanism has been announced for the current year. The report of the Kirit Parikh group on the issue has also not been implemented.