Government Doing its Best to Protect Common Man from Petroluem Price Hike; But Financial Health of Oil Companies Can Not be Ignored: Jaipal Reddy
Union Minister for Petroleum & Natural Gas Mr. Jaipal Reddy has expressed concern over the impact of weakening rupee over the crude prices and their impact on the under recoveries of the Oil Marketing Companies (OMCs). Addressing the Meeting of the Consultative Committee of MPs attached to his Ministry in Mumbai today, Mr. Reddy said, the exchange rate which was Rs 46 per US dollar at the beginning of September 2011, is now hovering around Rs 49. “Weakening by every Re 1, impacts the cost of diesel, PDS kerosene and domestic LPG by Rs 8,000 crore per annum” he added.
Mr. Jaipal Reddy said the Government is committed to protect the interests of common man and efforts are being made to minimize the impact of rising crude prices. The average price of the Indian basket of crude oil, which was $69.76 per barrel in 2009-10 has shot up to$111 per barrel. “To minimize the burden of rise in international prices on consumers, the Government has eliminated the customs duty on crude oil and reduced customs duty on petroleum products by 5%. Excise duty on diesel has also been reduced by Rs 2.60 per litre.” informed the Minister.
Even after these measures, the OMCs are currently suffering under recoveries to the tune of Rs 271 crore per day. They are expected to incur an under-recovery of over Rs 1,21,000 crores during the FY 2011-12.
The Minister said that the under recoveries have affected the financial health of OMCs, and diminishing cash flows have reduced resource generation for expansion and modernization. “OMCs are forced to borrow even for their working capital requirements” said Shri Jaipal Reddy. “If their financial health deteriorates on account of under recoveries, their ability to discharge assigned task of supplying the entire country with petroleum products would suffer,” he observed. The Minister said good financial health of OMCs is a pre-requisite for ensuring long term energy security in the country.
The Members of the Consultative Committee - Dr. Bali Ram Chandrakant B. Khaire, Harishchandra D. Chavan, , P.R. Natarajan, Purnamashi Ram, Radha Mohan Singh, Radhyey Mohan Singh, Sushil Kumar Singh, Uma Shankar Singh all from Lok Sabha and Shri Kumar Deepak Das, Maya Singh, Praveen S. Rashtrapal, Raashid Alvi, Rajniti Prasad, Vijay Darda all from the Rajya Sabha attended the Consultative Committee Meeting in Mumbai.
Secretary, Officers of the Ministry and Chief Executive Officers of Oil PSUs like Indian Oil, ONGC, HPCL, BPCL, GAIL, Oil India and the head of Petroleum Planning & Analysis Cell were also present.
Union Minister for Petroleum & Natural Gas Mr. Jaipal Reddy has expressed concern over the impact of weakening rupee over the crude prices and their impact on the under recoveries of the Oil Marketing Companies (OMCs). Addressing the Meeting of the Consultative Committee of MPs attached to his Ministry in Mumbai today, Mr. Reddy said, the exchange rate which was Rs 46 per US dollar at the beginning of September 2011, is now hovering around Rs 49. “Weakening by every Re 1, impacts the cost of diesel, PDS kerosene and domestic LPG by Rs 8,000 crore per annum” he added.
Mr. Jaipal Reddy said the Government is committed to protect the interests of common man and efforts are being made to minimize the impact of rising crude prices. The average price of the Indian basket of crude oil, which was $69.76 per barrel in 2009-10 has shot up to$111 per barrel. “To minimize the burden of rise in international prices on consumers, the Government has eliminated the customs duty on crude oil and reduced customs duty on petroleum products by 5%. Excise duty on diesel has also been reduced by Rs 2.60 per litre.” informed the Minister.
Even after these measures, the OMCs are currently suffering under recoveries to the tune of Rs 271 crore per day. They are expected to incur an under-recovery of over Rs 1,21,000 crores during the FY 2011-12.
The Minister said that the under recoveries have affected the financial health of OMCs, and diminishing cash flows have reduced resource generation for expansion and modernization. “OMCs are forced to borrow even for their working capital requirements” said Shri Jaipal Reddy. “If their financial health deteriorates on account of under recoveries, their ability to discharge assigned task of supplying the entire country with petroleum products would suffer,” he observed. The Minister said good financial health of OMCs is a pre-requisite for ensuring long term energy security in the country.
The Members of the Consultative Committee - Dr. Bali Ram Chandrakant B. Khaire, Harishchandra D. Chavan, , P.R. Natarajan, Purnamashi Ram, Radha Mohan Singh, Radhyey Mohan Singh, Sushil Kumar Singh, Uma Shankar Singh all from Lok Sabha and Shri Kumar Deepak Das, Maya Singh, Praveen S. Rashtrapal, Raashid Alvi, Rajniti Prasad, Vijay Darda all from the Rajya Sabha attended the Consultative Committee Meeting in Mumbai.
Secretary, Officers of the Ministry and Chief Executive Officers of Oil PSUs like Indian Oil, ONGC, HPCL, BPCL, GAIL, Oil India and the head of Petroleum Planning & Analysis Cell were also present.
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