The prospect of two state-owned oil-marketing firms, HPCL and BPCL, losing their navratna status on account of their gloomy financial performance has finally receded.

Setting aside a proposal to divest them of their coveted status from April 1, 2009, the apex committee on navratna PSUs, headed by cabinet secretary KM Chandrasekhar, which met on July 11, has decided to allow both firms to retain their navratna privileges.

The inter-ministerial committee of the department of public enterprises (DPE), which reviews the performance of navratna PSUs every three years, had proposed to the apex committee that ?as the composite scores of BPCL and HPCL are less than 60, these companies be put on notice for 2007-08 and if their performance did not improve in 2008-09, the divestment of navratna status would be necessary from April 1, 2009.?

The DPE?s proposal of November 13, 2007 followed a review of the performance of HPCL and BPCL from 2004-05 to 2006-07. Under DPE guidelines, the composite score is based on the last three years? simple average of various financial parameters and inter-sectoral performance. A minimum score of 60 is required to retain navratna status.

To this, the petroleum ministry had argued that it was not fair to assess the oil marketing companies based on actual profits and that the low scores obtained by HPCL and BPCL were essentially due to the non-adjustment of under-recoveries absorbed by the two firms.

The petroleum ministry told the apex panel that as under-recoveries suffered by HPCL and BPCL are the result of restrictions imposed by the government on the retail prices of petrol, diesel, LPG and kerosene, the two oil companies were forced to sell these petroleum products at a discounted price.

Accordingly, the petroleum ministry pitched hard for adjustments on account of these under-recoveries for the finalisation of the firms? scores. The revised scores of BPCL and HPCL comes to 68 each, well above the minimum score. Sources said both DPE and the apex committee finally agreed with this logic and agreed to retain the navratna status of the two oil firms. However, even as their navratna status remains intact, the ever increasing burden of under-recoveries resulting from high crude oil prices continue to haunt the oil sector.