Petroleum minister M Veerappa Moily has asked finance minister P Chidambaram to provide
an additional Rs 63,000 crore in the oil ministrys budget to compensate
oil marketing companies (OMCs) for massive under-recoveries on account of the steep fall in the rupee.
In a letter dated July 10,Moily has pointed out that his ministry expects the under-recovery of the public sector oil marketing companies to reach Rs 1,23,192 crore for 2013-14. The sum will be almost double the Rs 65,000 crore budgeted by the finance ministry for this fiscal.
In the new estimates the petroleum ministry expects under recoveries on diesel would account for Rs 59,918 crore,kerosene Rs 27,055 crore and domestic LPG cylinders Rs 36,129 crore. I would,therefore,request for your intervention to sanction government cash assistance of Rs 11,451 crore to OMCs for the first quarter of the current fiscal towards under-recoveries out of the existing budgetary provisions”,the letter notes.
The sum is expected to be a part of the first supplementary budget to be tabled by the finance minister in the monsoon session.
The oil minister has said that the financial benefits envisaged by the government by allowing the oil marketing companies to increase diesel prices by 40-50 paise a month and capping supply of domestic LPG cylinders to contain the under-recoveries have been neutralised due to the falling rupee.
Even allowing the OMCs to sell diesel to bulk consumers at market determined prices have not yielded any significant benefits,he points out.
The depreciation of the Indian rupee against the US dollar from an average Rs 58.40 in June to Rs 61.04 on July 8 has nullified the effect of these measures and resulted in massive jump in the projected under-recoveries of these companies for the current financial year.
An oil ministry estimate shows that every dollar dip in the exchange value of rupee raises the under-recovery of the downstream oil marketing companies by around Rs 8,200 crore. As on July 19 the price of the Indian basket of crude has reached $106.74 per barrel compared with $103.73 in the past fortnight,a petroleum ministry release notes.