The oil saga: Why Veerappa Moily's troubles have just begun

Oil minister Veerappa Moily's plans of increasing crude purchases from Iran have been dashed by the reluctance of the latter to accept rupees for their Farsi crude. The government is therefore now looking at the option of paying other currencies like the troubled Yen and Yuan. CNBC-TV18’s Nayantara Rai brings you up to speed with the latest on the oil saga.

Three months after the CCEA approved the new gas price formula, petroleum minister Veerappa Moily is getting set to move Cabinet to decide if RIL should benefit from the new price regime. The Finance Ministry had asked Moily to reconsider till RIL supplies the shortfall of gas from the KGD6. Vivek Rae, Oil Secretary says: "Cabinet note is being floated; it is going to cabinet for a final decision in another week or 10 days. The shortfall of gas is about 1 trillion cubic feet."
An international panel of experts will decide if the 1 tcf shortfall of gas was on account of geological reasons as provided by RIL or a result of the company not drilling enough wells.
Moily has another tough task ahead of him, that of convincing the Finance Minister to not go ahead with a 10 percent divestment of IOC. The oil secretary said the Finance Ministry is adamant on the stake sale to meet the Rs 40,000 crore divestment target, and this despite negative feedback from the investor community, and the IOC share price languishing at around Rs 200 versus levels of Rs 340 in January.
The finance ministry is planning the stake sale at a time the OMCs are staring at a high under-recovery bill of Rs 1.40 lakh crore for the fiscal. Moily concedes that despite the monthly diesel price hike of 45-55p a litre since January, diesel under recoveries remain high at almost Rs 11/l.
Moily's reaction to a question on whether a one-time diesel price hike is still on the cards: "We have not done it. We have not withdrawn that power of the OMCs, they continue to do it, they are empowered to do it - Rs 0.45-0.50, that is the ceiling."

Till then, Moily is betting big on the conservation campaign launched today. As part of that campaign Moily has promised to take a bus to work on October 9.