Jul 16, 2010, 09.28 AM IST
The first quarter of FY11 was worst in terms of under recoveries for state-run companies, said Oil Secretary S Sundareshan in an exclusive interview to CNBC-TV18. He feels Q2-Q4 will be much better than Q1.
According to him, the FY11 under recovery projection has come down to Rs 52,000 crore. "Of this, upstream companies will bear one-third of the total under recoveries. The government will bear at least 50% of under recoveries and will take a call on the balance 17% later."
Earlier today, SV Narasimhan, Director-Finance, Indian Oil Corporation , said every dollar rise in crude prices hurts petrol and diesel marketing companies by 35 paise.
The Oil Secretary stated that the Kirit Parikh formula for lower upstream burden is not acceptable and that GAIL will continue bearing a part of the subsidy burden.
The Parikh committee suggested, among other things, a complete deregulation of petrol and diesel prices. It also recommended raising LPG rates by Rs 100 per cylinder and kerosene by Rs 6 per litre.
Sundareshan is not too bothered on the timing of diesel deregulation.
Here is a verbatim transcript of the exclusive interview with S Sundareshan on CNBC-TV18. Also watch the accompanying video.
Q: The IOC Chairman was telling us that the overall under recovery is Rs 20,000 crore for the sector, so Rs 6,000 crore you have indicated will be borne by the upstream companies, what about the remaining Rs 14,000 crore?
A: First and foremost, Q1 is probably the worst in terms of under recoveries for the oil marketing companies (OMCs). Presuming that oil prices stay where they are, the other quarters are likely to be much better. In Q1, until June 25, there were also heavy under recoveries on diesel and petrol, this would change in the course of the next nine months.
Ofcourse you are constantly saying that there is no clarity on under recoveries, this is totally incorrect. First of all, the positive news when I spoke to you last the under recoveries at current prices were likely to be of the order of about Rs 72,000-73,000 crore and after the major reforms undertaken by the government, this has in any case come down to about Rs 52,000-53,000 crore for the current year, Rs 20,000 crore out of that has already been accounted in Q1.
If you take a figure of approximately Rs 52,000-53,000 crore for the whole year, the accepted principal, which will also by and large stand for the current year, is that the upstream companies would bear about one third of the total under recoveries. The government in any case is committed to bearing atleast 50% of the under recoveries. So you would have a situation in which the government would be bearing between two third to 50%, this is what we have to discuss with the government and sort out. This will also depend to a certain extent on how the OMCs perform in the course of the next few quarters.
So, if you take a figure of approximately Rs 52,000 crore, one third of this would certainly be absorbed by the upstream companies, the government would certainly absorb 50% or more, the kind of inexactitude is really about the balance 17%.
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