The government has said that it would not be a silent witness to the compounding losses of oil and marketing companies. Oil secretary R S Pandey has said that under recoveries need to be addressed quarter by quarter, and that the government cannot be a mute witness to the public sector oil marketing companies slipping further into the red.

Pandey also said that the IOC has been assured by the public sector oil companies that there would be no shortage of petroleum products in the country, and that oil manufacturing companies would provide pending LPG connections within the coming two months.

In an interview with CNBC-TV18, Pandey said that under-recoveries, better known as losses, would have to be provided for by either upstream companies or bonds. A nod from the Parliament is needed for the next portion of oil bonds, and that would be sought during the next session of Parliament.

On differential pricing of diesel, Pandey said that it is tough to administer differential pricing of diesel in metros. ''Metro users should be discouraged by levying additional charges,'' he said.

Pandey also said that the ministry of petroleum and natural gas would focus on demand management and address shortages by improving consumption efficiency and strengthening petroleum distribution networks. He said this would be an exercise that covers many sectors, and would not be confined to petroleum and natural gas alone.

A meeting between officials of the petroleum ministry and the public sector oil companies, chaired by petroleum minister Murli Deora has said that a formal view on the recommendations of the Chaturvedi committee would be taken after comments from stakeholders are received in writing.

For now, it is likely that the main recommendations of the Chaturvedi committee, which sought to better the financial health of oil companies, would in all probability remain unimplemented.

The committee's proposal for a gradual increase in fuel prices would have significant impact on many a political agenda, besides fuel inflation. The Committee had recommended that the government raise petrol prices by Rs2.50 per litre every month till March 2009, and raise diesel prices by Re0.75 per litre till 2010. Sources say that besides being inflationary, the government would be lease inclined to increase fuel prices during an election year.

Moreover, the committee's suggestions on export-parity pricing mechanism, special oil tax, zero import duty and differential pricing of petrol and diesel at the retail level have been also been branded as impractical.

The petroleum minister also said that implementing the dual pricing mechanism, as suggested by the Committee's Metro Extra proposal that seeks to levy a charge of Rs2 per litre on diesel for sports utility vehicles, is difficult to implement. Deora suggested that a better way to discourage the use of these fuel guzzling vehicles would be to increase duties on such vehicles.

The Committee's recommendation to shift the methodology for calculating fuel prices, from existing trade-parity pricing to a proposed export-parity pricing has not gone down well with the public sector oil companies either. That move alone would lead to a Rs27,000-crore revenue loss for refineries.

Sources in the oil companies say that public sector oil marketing companies need to maintain their refining margins to be in a position to cross-subsidise fuel at the retail level. The oil companies are also said to have voiced their concerns against the proposal to reduce import duty on petrol and diesel to zero, as the move would also reduce duty protection to the domestic refineries against international refiners.

The committee's proposal to impose a special oil tax on oil produced from pre-Nelp blocks is also learnt to have been shot down at the meeting, as ONGC pays a huge amount to meet oil subsidy needs presently.

The suggested mechanism, which seeks to cap revenue at $75 per barrel, would translate into a decline in the support from ONGC, as its average realisation from crude oil is less than the cap suggested. In 2007-08, ONGC had paid Rs22,000 crore towards oil subsidies in the form of discounts to public sector refiners.