Governement to Rescue OMCs

Centre to compensate oil marketing companies

Sujay Mehdudia

Bonds worth Rs. 35,300 crore to be issued

NEW DELHI: Faced with surging crude oil prices in the international markets and massive under-recoveries being incurred by the oil marketing companies (OMCs), the government has decided to compensate them by issuing oil bonds to the extent of 50 per cent against incurring under-recoveries during 2007-08 on sale of petrol, diesel, kerosene and domestic LPG at subsidised prices.

Although the decision to issue the second instalment of oil bonds is not in accordance with the demands raised by the Petroleum and Natural Gas Ministry, the decision has come as a big relief to the bleeding OMCs, who are faced with hiked under-recoveries.

The second instalment of oil bonds comes after a meeting between Minister of Petroleum and Natural Gas Murli Deora and Finance Minister P. Chidambaram on Tuesday. Oil bonds of the value of Rs.35,300 crore would be issued to the OMCs. As of now, oil bonds of the face value of Rs.20,333 crore covering the period April-December 2007 have been received.
‘Welcome development’

Stating that it was a welcome development, Mr. Deora said the Finance Minister appreciated the problems faced by the OMCs in an endeavour to insulate common man from the impact of highly volatile global oil prices which had been increasing steeply of late.

Mr. Deora said although his Ministry had demanded around 57 per cent oil bonds, the Finance Ministry had not accepted it,

However, he said whatever has been released was a welcome step towards mitigating the financial difficulties of the OMCs.

The Cabinet Committee on Political Affairs had considered the matter in its meeting held on February 14 and authorised the Finance and Petroleum Ministers to decide on the quantum of under-recoveries for 2007-08 to be covered by oil bonds.