Projecting huge loss, Moily sends SOS to PM

New Delhi : Projecting a revenue loss of Rs. 1,81,000 crore in the current financial year, Petroleum and Natural Gas Minister, Veerappa Moily on Saturday made a strong plea to Prime Minister, Manmohan Singh and Finance Minister, P. Chidambaram for a substantial hike in price of diesel, domestic LPG cylinder and kerosene oil as subsidies threatened to go out of control.

In identical letters to Dr, Singh and Mr. Chidambaram, along with a detailed calculation note, Mr. Moily said the upstream companies are likely to chip in around Rs. 70,500 crore as their share of the under recoveries. However, a gap of Rs. 96.500 crore will need budgetary support from the government or appropriate increase in the price of diesel, Kerosene and domestic LPG. The Oil marketing companies (OMCs) have already advocated a sharp Rs. 5 per litre hike in diesel prices and another Rs. 100 hike in LPG cylinder price. The demand for hike in prices of petroleum products has been forced by the sharp rise in crude oil price in international market and the continued decline in the value of rupee vis-à-vis US dollar. ``I have also discussed the matter with the Finance Minister and tried to work out some concrete measures which could result in a saving of around $19-20 billion in foreign exchange during the current financial year,’’ he wrote to the Prime Minister.

Mr. Moily also laid down a road map to cut the foreign exchange outflow by $20 billion by taking certain measures to not only bring down consumption of petroleum products but also diversify the crude oil basket. Although, the OMCs on Saturday hiked petrol prices by around Rs. 2.35 per litre (exclusive of taxes), diesel was increased by 50 paise per litre. However, the government is waiting for the current session of Parliament to be over on September 6 before affecting a steep hike in diesel and LPG prices. However, no view has been taken to hike kerosene price.

In his note, the Petroleum Minister said the current under recovery projected figures were 13 per cent higher than the previous year’s Rs. 1,61,309 crore. The note said forex outflow of $7 billion could be curtailed through reduction in imports, conservation efforts, reduction in LPG demand and ethanol blending programme. An inflow of $3.75 billion was expected through external commercial borrowings by oil companies during the financial year. ``If we consider the average price of Indian crude basket at $110 a barrel and the average exchange rate at Rs. 66 a dollar for the balance financial year, the under recovery of oil marketing companies will increase to Rs. 1,68,000 crore. If international prices increase to $115 a barrel, the under recovery will reach around Rs. 1,81,000 crore,’’ he warned.

Despite partial decontrol of diesel was taken from January this year mandating OMCs to effect a 50 paise monthly increase, the monthly under recovery on diesel now stands at Rs. 6,204 crore. ``At the current level, it will take at least 20 months to eliminate the under-recovery on diesel only,’’ he said. The current under-recoveries on diesel, kerosene and LPG stood at Rs. 12.12 a litre, Rs. 36.83 a litre and Rs. 470 a cylinder.