The Finance Ministry’s move to change fuel pricing norm and not-compensating oil sector PSUs for their losses will put a question mark on their survival, Petroleum Minister Veerappa Moily told reporters here on Wednesday.
Moily said he will meet Finance Minister P Chidambaram soon to discuss the auto fuel pricing as the very future of oil companies was at stake.
“I can understand that in the process of consolidation of finance reducing the fiscal deficit is important. But if there are no expansions, no investments. This is not going to add up to fiscal consolidation. Merely deducting under recoveries is not going to improve the situation,” he said.
The North Block wants petrol and diesel to be priced at a rate they can get in export market rather than current practice of pricing the fuel after adding transportation and customs duty to the international price.
“From 2005-06, the oil marketing companies have not been adding any margin on crude oil or on petroleum products. What is import price plus transportation and taxes all that is there in the selling price,” Moily said.
The minister himself pointed out that the three OMCs including Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp together projected to end the fiscal with a revenue loss of `1,63,000 crore. Of this the Finance Ministry wants to shave off `17,000 crore by changing methodology to Export Parity Pricing.
“Where do we get the money if the actual losses are not compensated. They cannot expand or modernise refineries... It is a hand-to-mouth situation for oil companies, they earn in the morning and by evening spend all the money. There is no surplus generated,” he said.
“This is a matter of great concern because overall oil import is 84 per cent of our requirement. No country can survive if these oil companies cannot survive. We need to modernise refineries for which surplus needs to be generated. Not covering under-recoveries on fuel sales will ultimately sink the oil companies,” he added.