The ongoing stand-off between the state-run oil companies and airline companies over unpaid fuel bills and conflicting statements by his two cabinet ministers?the petroleum minister, Murli Deora and civil aviation minister, Praful Patel?has made the Prime Minister Manmohan Singh intervene in the matter. Singh is understood to have has asked the two ministers to resolve the fuel bills dispute at the earliest.

Sources said that following the Prime Minister?s intervention, Deora has called a meeting of oil companies and airlines on Wednesday. Besides Patel, the representatives of ministry of finance will also be present at the meeting. ?The Prime Minister is concerned and wants the ministers to find a solution at the earliest. No one wants airlines to stop operations nor does anyone want oil companies to lose,? an official source said.

Aviation turbine fuel (ATF) is being priced by the oil companies at import parity rates (as if the fuel were to be imported) because around 80% of the crude oil used to make the fuel was imported at international rates. However, due to various taxes and duties in India, the price of ATF being sold by the OMCs is much higher than its price in the international oil market.

Pricing of ATF was de-regulated on April 1, 2001 and since then has been governed by fluctuations in the global oil market. Over the base price, customs duty of 5%, excise duty at the rate of 8%, 3% education cess and sales tax at an average of 25% is levied. State taxes and excise duty amount for about one-third of the price of ATF.

While speaking to reporters, Deora did not comment on concerns expressed by the Prime Minister but did confirm that he had called a meeting with Patel and oil companies to explore the options. ?We want to help these airlines and so I have called a meeting tomorrow to explore the options,? said Deora.

Jet Airways and Kingfisher Airlines and state-run Indian Airlines together owe more than Rs 2,000 crore in fuel bills to Indian Oil, Bharat Petroleum and Hindustan Petroleum. ?Some of them have not paid even after the expiry of 60-day credit period,? Deora said. On his part, Praful had maintained that the aviation companies have not defaulted and still have the grace period left to repay their dues. Sources said it was these conflicting reports which made the Prime Minister intervene in the matter.

Oil companies, who are projected to lose Rs 1,47,592 crore on sale of petrol, diesel, domestic LPG and kerosene, are virtually living on borrowed funds and need liquidity. ?Airlines have to clear their outstanding within the agreed 60-day credit period. Commitments (to pay within 60 days) have to be met,? Deora said but ruled out stopping jet fuel supplies to airlines.

?We know that airline industry too is going through a tough phase. There are credit problems and we do not want them to go off the skies,? he said

Deora, who had private meetings with Goyal and Mallya in the past couple of days, said the airlines need to do cost cutting. ?They have to tighten their belts and reduce expenditure… One of the solutions could be that airlines share passengers instead of running empty flights,? he said.

Airlines, who are running in the red because of economic slowdown and high fuel costs, have sought cut in central and state duties on jet fuel. ?I am sure we will be able to find a solution,? Deora said.

Jet Airway?s total outstanding to IOC, the nation?s largest oil firm, stood at Rs 859 crore, of which it had defaulted on payment of Rs 330 crore, which was due after the expiry of 60-day period. Of this, it yesterday paid Rs 100 crore.

Similarly, Kingfisher owed Rs 110 crore to IOC, of which Rs 60 crore remained unpaid even after the expiry of the credit period. It paid Rs 12 crore yesterday.

Jet owes Rs 284.3 crore to Bharat Petroleum while Kingfisher owes Rs 246 crore to BPCL and Rs 525 crore to HPCL. Deora had personally brokered the 60-day credit deal between Jet?s Naresh Goyal and IOC Chairman Sarthak Behuria. Deora had earlier said he felt hurt when Goyal did not keep his word on making timely payments. He had also said both Jet and Kingfisher had to clear their outstanding at the earliest as state-run oil firms themselves were passing through difficult times.

IOC, BPCL and HPCL together lose about Rs 280 crore on sale of petrol, diesel, domestic LPG and kerosene. The three companies had not received oil bonds, which are used to compensate for half of the losses they make on fuel sales, for past three quarters. The combined borrowings of the three, which stood at Rs 48,400 crore in March 2007 and Rs 66,900 crore in March 2008, has increased to Rs 1,10,000 crore in October.