Pressure on oil cos as crude price rises to $106

TIMES NEWS NETWORK

New Delhi: International crude's relentless march northwards, testing the $106 a barrel-mark on Friday, will completely wipe out the marginal reprieve state-owned oilmarketing companies received from last month's increase in pump prices and build pressure on finance minister P Chidambaram to reduce oil taxes, a mood he is unlikely to share in the season of poll handouts.
Last month, the government raised prices of petrol by Rs 2 a litre and diesel by Re 1 but left cooking gas and kerosene prices untouched. This gave a benefit of Rs 840 crore, a drop in the ocean when they were looking at ending the year with a loss of Rs 71,808 crore. Again, the inadequacy of the measure becomes stark considering that the present pump prices correspond to roughly $70 a barrel, leaving a yawning gap with international price.
The government's simultaneous move to increase the quantum of bonds— Centre's IOUs—to 56-57% of the losses amounting to Rs 41,000 crore, up from 42.7% or Rs 24,000 crore also did not do much to lift oilmarketing firms' spirits as the revision had shaved the retailers' share of loss-bearing by a mere 1.2% from 8.4%.
The domestic crude and gas producers such as ONGC, OIL and GAIL were to continue to share 24% of the total losses, while the marketing firms were to continue to suffer their share of under-recovery.
During the discussions ahead of the price increase, a big and influential section among the policymakers—including agriculture minister Sharad Pawar and oil minister Murli Deora—steadfastly demanded reduction in customs and excise levies on motor fuels.