Deora proposes additional oil bonds, cess to cover oil company losses

27 May 2008

The petroleum ministry has asked the finance ministry to issue additional oil bonds to cover 57.1 per cent of the total Rs77,000 crore losses suffered by public sector oil companies last fiscal.

Petroleum minister Murli Deora, who met finance minister P Chidambaram today, has suggested a slew of measures, including a cess on income tax and corporate tax to  bail out oil firms reeling under high global oil prices.

With the international prices of crude oil hovering around $133 a barrel, the petroleum ministry has suggested a mix of options, including revision of import duties on petroleum products, imposing a cess on income tax, as well as additional oil bonds to compensate for losses suffered by oil marketing companies.

Deora, however has not been able convince the finance minister on the need for a duty cut. He could also not secure an assurance regarding issuance of oil bonds to compensate oil marketing companies, whose under-recoveries from subsidised fuel sales have ballooned to over Rs225,000 crore. (See: Subsidies driving top oil companies bankrupt)

"We are trying our best to resolve the issue as soon as possible," Deora said after the meeting.

The government is expected to take a decision on increasing prices of petrol and diesel soon, petroleum ministry officials said.