Govt to bear LPG, kerosene under-recoveries: Oil secy

Q: Now that you have clarified that the upstream companies will not bear any of the cooking fuel losses, is that decision that you speak of regardless of the price of crude or dependent and contingent on where the price of crude is?

A: So far we have taken a call based on certain assumptions and it is very difficult to estimate under-recovery. You would be aware that an increase of USD 1 per barrel in crude price on an annual basis increases under recovery by over Rs 3,000 crore. You also should know that an increase in the rupee-dollar exchange rate by Rs 1 rupee increases under-recovery by over Rs 4,300 crore on an annual basis. Thus, there are lots of uncertainties because the exchange rate and the crude prices changes everyday. So some assumptions have been made and it has been decided that the under-recovery on account of petrol and diesel would be shared by the upstream companies.

Q: At this point, what are you working with, as the total figure for the subsidy. You indicated Rs 30,000 crore yesterday and how would that be split up between auto fuel and cooking fuel losses?

A: Rs 30,000 crore is a calculation based on the current exchange rates, which is based on an average of USD 70 per barrel crude over the year and that takes us to an amount of about more than Rs 30,000 crore on account of LPG and kerosene alone. The tentative calculations of the under-recoveries for all the four products indicate a figure of Rs 70,000 crore on an annual basis. Thus, these are all very tentative figures and as I explained earlier, it could change because of the exchange rate due to crude pricing and at the current level of the product pricing.

Q: Having allowed oil marketing companies (OMCs) to raise prices, thereby bringing down their under-recoveries significantly. Would you consider giving them some oil bonds during the next fiscal year or the current fiscal or do you think the government will be reluctant to give them any support through oil bonds this year?

A: The government will give them full support as far as their under-recovery is concerned. But, in what form it will come, this we will work out in consultation with the Ministry of Finance. As you would be aware, the first month of the current financial year was not do bad for the OMCs. But, in the last one month or little over one month, it has really turned negative for them. Now, the season has come, we are in touch with the Finance Ministry and we will work out details.

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