Saturday, July 19, 2014

Oil PSUs collected additional Rs 26,626 crore b/w 2007-12 , says CAG report

Report by Comptroller and Auditor General of India on Pricing Mechanism of Major Petroleum Products by Central Public Sector Oil Marketing Companies (OMCs) has stated that OMCs collected additional Rs 26,626 crore during 2007-2012 by making people pay for imaginary charges such as customs duty on domestic sales and gave undue benefit of Rs 667 crore to Essar Oil and Reliance Industries in purchase of High Speed Diesel (HSD) in one year (2011-12) alone.

The pricing mechanism followed by Indian Oil Corp, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd does not appear to have been translated adequately in terms of efficiency improvement in refining margins, optimization of costs of production and improvements of yields, the report stated.
OMCs uplift petroleum products from standalone/private refineries in order to fill the gap between production and domestic requirement at RGP (i.e. Trade Parity Price or TPP for petrol and Diesel and Import Parity Price or IPP for other products).Private Refiners (like-Essar Oil and Reliance Industries) export balance petroleum products at prices comparable to EPP/FOB, which are lower than TPP/IPP. Procurement at TPP/IPP affords an undue benefit to private refiners, which was estimated at Rs.667 crore on Diesel in only one year i.e. 2011-12.The benefit to stand alone PSU refineries on the same count was Rs.1428 crore during 2011-12.

In order to meet the requirements of working capital due to delayed settlement of under recovery claims, OMCs sold oil bonds issued by govt. at a discount suffering a loss of Rs.3994 crore. OMCs also incurred Rs.22802 crore towards interest on borrowed working capital and suffered a interest loss of Rs.5180 crore due to delay in release of compensation during 2007-08 to 2011-12.Delay in declaration of cash compensation also led to avoidable payment of interest of Rs.381 crore on short payment of advance income Tax by the OMCs.