IOC may receive remaining Rs. 11,000-crore compensation
New Delhi   09-Jun-2011

State-run IndianOil expects to receive Rs. 11,000 crore remaining cash compensation from the government by June-end for incurring revenue losses on selling diesel, kerosene and cooking gas at controlled rates in 2010-11.

“We have got a letter from the government stating their commitment to compensate us and are expecting the actual cash transfer of Rs. 11,000 crore to happen in the next 2-3 weeks, latest by June end," IndianOil (IOC) director finance PK Goyal said.

The government forces state-run oil marketing firms — IOC, Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) — to sell auto and cooking fuel at controlled rates which are often below cost. But it partly compensates them for their revenue losses while balance subsidy burden is shared between public sector upstream companies and fuel retailers.

Last month, the government had agreed to provide Rs. 20,000 crore as full and final settlement for 2010-11. Of this Rs. 11,027 crore was the share of IOC, while BPCL had to get Rs. 4,595 crore and HPCL, Rs. 4,379 crore. The companies declared their annual results for the previous financial year in May last week factoring in the government’s contribution. They are now waiting for actual cash transfer from the finance ministry.

“We have accounted for the cash in our book of accounts and shown it as income,” said Goyal.

But HPCL and BPCL said that they were not sure when their portion of the cash compensation would be released. “I don't have a definite idea when the cash compensation will be released but I am not expecting it till July,” said B Mukherjee, director-finance, HPCL. “I am not certain of the exact timeframe of when we will receive this additional cash compensation,” said SK Joshi, director-finance, BPCL.

OMCs were originally seeking Rs. 30,000 crore as monetary compensation from the government. “Last fiscal the industry's under-recoveries were around Rs. 78,000 crore, out of which a third was borne by upstream companies, while the government gave us around Rs. 20,000 crore in September 2010. We still need another Rs. 30,000 crore,” BPCL chairman and managing director RK Singh had said earlier.

While, petrol price were deregulated in June last year, OMC’s continue to sell diesel, domestic LPG and kerosene at government ruled prices. At present, OMCs are losing around Rs. 18 a litre on diesel, Rs. 30 a litre on kerosene and Rs. 330 a cylinder of LPG.