With less than a week left for the financial year to get closed, confusion looms large over the quantum of oil bonds to be issued by the government to the public sector oil marketing companies for the fourth quarter of the fiscal ending March 31, 2008.
While the finance ministry has cleared oil bonds worth Rs 9,076.41 crore for the third quarter (October-December 2007), the bonds are yet to be released to the oil companies. Moreover, it is still not clear whether the oil bonds to be issued for the quarter of the current fiscal will be equivalent to 57.1% of the under-recoveries of oil companies or be kept at the earlier level of 42.7%.
Pending clarity on the issue, the petroleum ministry has shot off a letter to the finance ministry (dated March 20), asking it to immediately release Rs 21,752.12 crore of oil bonds for the third and fourth quarter of the current fiscal. This amount has been calculated in line with the earlier cabinet decision (of October 10, 2007) that bonds equivalent to 42.7% of the total under-recoveries of the oil marketing companies (OMC) should be issued.
It may be recalled that at its February 2008 meeting, the cabinet while approving a minimal hike in the petrol and diesel prices had agreed to increase the quantum of oil bonds to be issued to the public sector OMCs. It was agreed in principle that a higher quantum of oil bonds equivalent to 57.1% of the under-recoveries of the OMCs would be issued by the finance ministry. The decision to release higher quantum of oil bonds was taken, as the finance ministry was averse to any restructuring of excise and custom duties on the petroleum sector.
Officials said the issue of oil bonds equivalent to 57.1% is being separately taken up by the petroleum ministry with the ministry of finance. Oil bonds worth Rs 11,256.92 crore have already been issued so far for the period April-September 2007. At the level of 42.7%, oil bonds for Rs 21,752.12 crore including Rs 9,076.41 crore for the third quarter (October-December 2007) and Rs 12,675.71 crore for the fourth quarter (January-March 2008) are required to be issued by the finance ministry to the OMCs.
The under-recoveries of the oil companies for the fourth quarter alone are estimated at Rs 29,685.51 crores. This includes IOC’s share of Rs 16,563.87 crore followed by BPCL’s Rs 7322.64 crore and Rs 5,799 crore of HPCL during the period January-March 2008.
The formula cleared by the Cabinet on October 10, 2007 specifies that the government would issue oil bonds worth 42.7% of the losses while 33.3% would be borne by upstream companies, and the remaining 24% by the OMCs. Following a sudden jump in under-recoveries of the oil companies, it was agreed in February 2008 that the quantum of oil bonds would be increased to 57.1% of the under-recoveries of the OMCs.