Industry's total under-recovery in FY11 is Rs 78000cr: IOC

The government has increased upstream subsidy share to 38.5% of its total subsidy in this fiscal, reports CNBC-TV18 quoting sources. It is learnt that due to this move, upstream oil companies will have to bear Rs 30,000 crore in FY11.

In an interview with CNBC-TV18, PK Goyal, Director-Finance, IOC said that if the subsidy share on upstream companies is increased then it would be a positive news for the downstream companies. However, he said that the company hasn't received any confirmation from the ministry in this regard. Talking about the gap between what the government, upstream companies the company shares he said, " The total under recovery for the industry for 2010-11 is roughly at Rs 78,000 crore. Out of that, the government has compensated Rs 41,000 crore and the balance gap is of Rs 37,000 crore." Below is the verbatim transcript of his interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video.  Q: Is it conceivable that the upstream burden might go up significantly? A: No. I have no such confirmation from the ministry. If it is there, it will be very positive news for the downstream companies. Q: Have you asked to the government that upstream bears a higher part of the subsidy burden? A: No. We have not asked specifically, but have told that there should be a suitable compensation either through the government subsidy or from upstream companies. Q: When you made that recommendation, what was the response from the oil ministry officials? A: They are working on the compensation mechanism. Once we get it, we will come back with more details. Q: Where does the gap currently stand at between what the government, upstream companies and you share, and how much still remains? A: The total under recovery for the industry for 2010-11 is roughly at Rs 78,000 crore. Out of that, the government has compensated Rs 41,000 crore and the balance gap is of Rs 37,000 crore. Last year, the oil companies had a compensation of 12% under recovery on the total under recovery. We expect it to be in that range of 10-12% which the downstream companies will be meeting. Don't miss: How will increased upstream subsidy impact ONGC? Q: Did oil marketing companies ask for an adequate compensation related to this year or did they ask for a re-look at the subsidy bearing mechanism and the upstream should start bearing more from here? A: There should be some suitable mechanism for compensating the under recoveries which the downstream companies are getting on these three sensitive products, for which government is working. Q: Do you want that 33% upstream formula changed? A: No. We want the 33% compensated, either through upstream company or budgetary support. Q: Do you mean that the downstream companies should not bear any part of the burden at all? A: We had some under recovery on MS (petrol). We want the 100% compensation to be given on these three products. Q: Have you made up your mind on the possibility of a second petrol price hike in the next ten days? A: No. We are not thinking on those lines. Let us hope for the best because the prices are coming down. We will look into it on June 1. Q: When will the EGoM be schedule to take a decision on fuel prices? A: We are not aware of any fixed date. Q: Will you not raise any prices at IOC till June 1? A: We won't raise any prices for MS (petrol). Q: Would you not raise prices for petrol? A: Yes.