Mangalore Refinery and Petrochemicals Ltd, a subsidiary of ONGC, has approached the State-owned oil marketing companies (OMCs) to consider refunding the discounts extended by the company on domestic liquefied petroleum gas and kerosene sold under the public distribution system.

If the retailing companies agree to refund discounts, the amount involved could be Rs 142.88 crore.

The Petroleum Ministry, after considering MRPL's request on discounts, felt that the standalone refiner could seek refund of discounts on LPG and kerosene (SKO) from retailing oil companies with effect from April 1, 2006. This, however, was subject to the OMCs agreeing to the request, sources told Business Line. A senior Indian Oil Corporation executive said, "The company is yet to take a view on the issue."

In the second quarter of the current fiscal pending receipt of formal confirmation from OMCs, MRPL continued to account the LPG and SKO sales net of discounts. The discounts on LPG and SKO accounted during the quarter was Rs 77 crore and for the first half of the fiscal (cumulative for six months) Rs 142.88 crore. Asked whether MRPL would seek refund of the entire amount, sources said if the OMCs considered the request then the company would seek refund of Rs 142.88 crore extended for first six months of the fiscal.

MRPL saw its net profit during the second quarter plummet 94.58 per cent due to a sharp reduction in product prices, increased exports, and discounts on LPG and SKO to OMCs. The company earned a lower net profit of Rs 9 crore for the second quarter of the financial year 2006-07 (Rs 166 crore in the corresponding quarter).

The net profit during the half-year ended September 2006 was Rs 225 crore, down 41 per cent (Rs 382 crore).

Standalone private and PSU refiners such as Reliance Industries Ltd (RIL), MRPL, Chennai Petroleum, Numaligarh Refinery (NRL) and Kochi Refineries extend discounts on the petroleum products sold by them to retailers to partially offset the under-realisation suffered by retailing companies because of selling the products below the cost price. With RIL declining to extend any discounts for the current fiscal, MRPL had approached the Petroleum Ministry seeking level-playing field on the issue.

RIL had declined to offer any discounts to retailers during the current fiscal on the ground that it was not part of the subsidy-sharing mechanism extended by the Government. Since MRPL was also not part of any subsidy-sharing mechanism by the Government, the sources said MRPL and NRL's plea should also be considered on the same lines. Last year, RIL had extended a discount of Rs 750 crore, MRPL gave close to Rs 290 crore, CPCL gave approximately Rs 240 crore, KRL gave about Rs 200 crore and the rest came from others.

Taken from Business Line

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