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.

Union Cabinet clears greenfield Refinery cum Petrochemical Complex proposal in Barmer, Rajasthan

The Union Cabinet has approved the proposal of Hindustan Petroleum Corporation Limited (HPCL), a Public Sector Undertaking to set up a 9 MMTPA greenfield Refinery cum Petrochemical Complex in Barmer District in Rajasthan, as a Joint Venture (JV) with Government of Rajasthan under the NAME HPCL-Rajasthan Refinery Limited (HRRL). A subsidiary of The Proposed refinery will be its Equity of 74% to be held by HPCL with HPCL and 26% to be held by the Govt. of Rajasthan. The cost of the project is estimated at Rs. 37,230 crore. The project cost is proposed to be sourced with a detbt / equity ratio of 1.5:1. Total equity component is Rs.14, 892 crore and debt is Rs.22, 338 crore. HPCL's equity contribution is Rs.11, 020 crore at 74% equity and Govt. of Rajasthan's Equity Contribution is Rsl3, 872 crore at 26%. M / s. HPCL has signed a Memorandum of Understanding on 14th May, 2013 with Govt. of Rajasthan in this regard. HPCL has subsequently also signed a JV agreement with Govt. of Rajasthan on 11th July, 2013 on these terms for setting up the refinery as a joint venture. The Proposed Process will refinery of 4.5 MMT and 4.5 MMT of Mangala Crude Arab / other Crude (s). There shall be A Direct and indirect economic Benefit to the Economy of Rajasthan, which shall, besides Industrialization, Result in substantial increase in Income, output, employment and tax earnings of the State.