Thursday, December 22 2005 18:12 Hrs (IST) - World Time -

New Delhi: Revenue loss suffered by public sector oil retailing firms on sale of petrol, diesel, LPG and kerosene below their production cost will almost double to Rs 38,154 crore this fiscal, the Lok Sabha was informed today (Dec 22, 2005). "The estimated under-recoveries (on sale of fuel) was Rs 9,274 crore for 2003-04 and Rs 20,146 crore for 2004-05, which is projected to rise to Rs 38,154 crore during the current year," Petroleum Minister Mani Shankar Aiyar said in reply to a question.

Public sector oil marketing companies - Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp - have modulated the price increase in petrol diesel and maintained the prices of subsidised domestic LPG and PDS kerosene despite the steep rise in international prices. This has resulted in huge revenue loss on sale of all these products.

This burden would be equitably shared by consumers, the government and the oil companies. "Accordingly, from 2003-04 onwards, the government introduced the subsidy sharing mechanism in which, after taking into account the subsidy provided for the fiscal budget, the balance is shared by the upstream (ONGC and GAIL) and the downstream companies (IOC, BPCL and HPCL) equitably," he said.

While petrol, diesel and LPG prices have been raised twice this year, Oil and Natural Gas Corp's (ONGC) share of the subsidy has almost doubled.

"In order to compensate the public sector oil marketing companies on account of mounting under-recoveries suffered by them over and above the amount allowed as subsidy through the Budget, the government has decided to issue oil bonds. The Ministry of Finance has made provision to issue bonds of the face value of Rs 5,750 crore during the current financial year," he said.

Aiyar said ONGC has represented to the government seeking a review of the rationale of the equitable subsidy sharing mechanism keeping in view the increase in retail selling prices of petrol and diesel, sharing of under-recoveries by standalone refineries like Reliance Industries and softening of international price of crude oil and petroleum products.

"The government policy is to equitably share the burden of under-recoveries suffered by the oil marketing companies in the context of anomalous price increases. The share of the upstream companies will be proportionate to the total quantum of under-recoveries," he said.

In reply to another question, Aiyar expressed concern at the increase in flaring of gas during production of natural gas in Assam by state-owned Oil and Natural Gas Corporation.

Gas flaring by ONGC has increased from over 8 per cent to 14.1 per cent in the last five years, he said in reply to a question in Lok Sabha here.

"I am deeply concerned that there has been an increase in gas flaring by ONGC," he said hoping the company would take corrective action to check it.

Gas flaring by Oil India Ltd has come down to 7.3 per cent from 8.3 per cent five years ago.

ONGC produced 467 million standard cubic meters of gas in Assam in 2004-05, off which it flared 65.7 mmscm or 14.1 per cent. In 2003-04, it flared 65.7 mmscm or 13.2 per cent of 498 mmscm gas produced while in 2002-03, it flared 51.1 mmscm or 10.7 per cent of 476 mmscm gas produced.

OIL on the other hand flared 130.56 mmscmd of 7.33 per cent of 1780.14 mmscm gas produced in Assam during 2004-05. It flared 107.46 (6.30 per cent) and 101.89 (6.49 per cent) gas out of 1705.85 mmscm and 1570.54 mmscm gas produced from Assam in 2003-04 and 2002-03 respectively.

To reduce flaring of gas in Assam, ONGC and OIL were getting new fields connected to the gas network immediately and supplying low pressure gas from marginal fields directly to low pressure systems of tea gardens in the vicinity.