Monthly Oil Pool Deficit Rise Put At Rs 800cr

The oil pool account deficit would have jumped up by at least Rs 1,000-crore every month but for the fall in the international prices of crude oil. The current monthly increase in the deficit is about Rs 800 crore.

Though the decline in the international prices of crude oil below the level anticipated in the oil economy budget (OEB) was expected to have a sobering effect on the oil pool account deficit, it continues to grow at a rapid pace.

This, petroleum ministry officials say, is because of the normal 10 per cent increase in oil consumption in the country necessitating higher imports, interest on the accumulated Rs 16,000-crore oil pool account deficit, the recent increase in the railway freight for petroleum products, hike in cess and royalty on crude oil, and the increase in the prices being paid to national oil companies for the crude being purchased from them.

 

Officials concede that there has been about 10 per cent decline in the prices of crude and other petroleum products in the international market. However, correspondingly there had been a similar increase in consumption of petroleum products. Therefore, the higher levels of imports more than offset the benefits of lower international prices.

The officials said that the government is carrying a heavy interest burden on the accumulated oil pool account deficit which has already touched Rs 16,000 crore. Even if the interest rate is taken at 18.5 per cent, the annual interest burden on the oil pool account comes to Rs 3,000 crore. This implies that the monthly interest burden would be about Rs 250 crore.

Added to this is the 12 per cent hike in rail freight for all petroleum products except liquefied petroleum gas (LPG) and kerosene. While the railways earned Rs 1,997 crore from petroleum products in 1996-97, this year it is estimated to rise to Rs 2,328 crore an increase of Rs 331 crore during the year.

Moreover, the increase in royalty on the indigenously produced crude oil to be paid to states has also added to the deficit. The royalty rates have been raised from Rs 528 a tonne to Rs 578 a tonne an increase of Rs 50 a tonne. Considering an indigenous output of around 33 million tonne, the total increase in royalty comes to Rs 165 crore every year.

The governments decision to give a higher price from this year to the national oil companies the Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) for the crude oil produced by them has also come at a time when the petroleum ministry is working out various strategies to tackle the burgeoning oil pool account.

The price has been raised from Rs 1,741 a tonne to Rs 1,991 a tonne an increase of Rs 250 a tonne. On a production of 33 million tonnes of crude, the total outgo on account of this increase in crude prices comes to Rs 825 crore every year.