Officials feel ministry erred in letting oil cos deviate from core biz

Written by Siddhartha P Saikia | New Delhi | Updated: May 23 2014, 06:19am hrs
The ministry of petroleum and natural gas made a mistake in letting government-owned companies deviate from their core activities, leading to 'loss of focus', feel senior officials. For example, the ministry rues upstream major ONGC venturing into downstream and mid-stream activities and HPCL setting up sugar mills.

These observations were part of the presentation readied for the new petroleum minister in the Narendra Modi government.

The ministry's what-should-not-have-happened list also includes putting in abeyance the transfer of LPG subsidy to consumers' bank accounts using the Aadhaar platform.

One of the flagship programmes taken up by the Congress-led UPA government was Direct Benefit Transfer for LPG consumers (DBTL), aimed to curb black marketing of subsidied cooking gas. However, the government put DBTL in abeyance since January. The cancellation of the DBTL was the biggest setback for the Aadhaar roll-out plan as this was the Centres most visible and successfully implemented schemes among 28.

One of the important factors dampening the country's oil and gas sector, according to the ministry, also includes the disputes between the government and the exploration companies. The ministry now realises that the production-sharing contract (PSC) should have been revised based on experience derived from working on existing contracts.

The petroleum ministry ended in arbitration on 26 cases with private companies. Of this, 20 are still unresolved. There are many more cases where there are disagreements between regulator, ministry and explorers.

As per Planning Commission, between June and December 2013, the government has transferred R3,200 crore to bank accounts of 20.7 million LPG customers, who had got the linkage in 291 districts. In September 2013, the DBTL beneficiaries were only 21.9 million for whom the government had transferred R222 crore subsidy in 54 districts. The numbers have leapfrogged, since then.

Moreover, the petroleum ministry believes that an increase in cap on supply of subsidised domestic cooking gas refills from six to nine and then to 12 was not needed.

In FY14, oil marketing companies incurred R39,558-crore loss on selling LPG below market cost. This was less than R46,458 crore incurred in FY13.

The ministry rues absence of clarity on engagement with Iran. The Indian refiners, both in private and public sector, faced uncertainities in sourcing crude oil from the Gulf country as sanction levied by the West created roadblocks for transfer of payments.

The sanctions have impacted India as it has drastically cut down its crude imports, almost by half in FY14 from 21.20 mt in FY10. Less of good quality Iranian crude is flowing to India because refiners are not able to make payments and ships carrying crude cant get insurance as world powers threaten not to re-insure refineries processing oil from the Gulf nation.