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`Oil companies to incur huge losses'

By Our Special Correspondent

NEW DELHI, NOV. 2. The Union Petroleum Minister, Mani Shankar Aiyar, today warned that public sector companies will suffer losses up to Rs. 20,000 crores in the current financial year in case prices of petroleum products are not raised to match soaring world crude oil prices. He said this might affect the ability of these companies to carry out investment programmes.

He stressed that the Government which has so far resisted any rise in product prices since June would continue to protect consumers' interests. At the same time, he indicated that the solution could be to reduce excuse and customs duties on crude oil and products such as petrol and diesel.

Under-recoveries

He disclosed that in the first six months of the current fiscal, the oil companies have had to bear Rs. 10,000 crores of under-recoveries as a result of the non-revision of prices. In case status quo is maintained, he felt that there could be a similar loss of Rs. 10,000 crores in the rest of the year.

Mr. Aiyar cautioned that the investment capabilities of these companies could be affected by these under-recoveries in the long run.

In this context, he pointed out that the petroleum sector contributed over Rs. 100,000 crores annually to the Central and State governments in terms of taxes, duties and other levies. It was based on these funds that many development schemes were chalked out, he said while adding if all the duties were removed there may be no roads in the country.

`A balancing act'

He maintained that the only way to cushion domestic consumers against the unprecedented rise in global crude oil prices and to protect the bottomline of the oil companies was to reduce import and excise duties on crude oil and petroleum products. At the same time, this would affect the revenue mobilisation efforts in the current fiscal. Therefore, he described the entire exercise as "a fine balancing act".

Mr. Aiyar conceded that any petroleum minister would want duties to be slashed as half the product prices were made up of various taxes. In Delhi, for instance, petrol would cost Rs. 18 a litre rather than Rs. 36.14 a litre now, without any duties. On whether the issue would be taken up at tomorrow's Cabinet meeting, he said he did not know but was going prepared on the subject.

Standing Committee

He also told reporters that he was in favour of using former diplomats to help the country acquire stakes in oil and gas fields abroad.

He has therefore asked the Ministry of External Affairs to depute an Indian Foreign Service officer in the rank of Additional Secretary to help the oil ministry and public sector oil firms in their efforts to acquire oil and gas projects abroad.

He has also appointed a Standing Committee on Oil Diplomacy For Energy Security with former diplomats, Arjun Sengupta, and M. Hamid Ansari, as chairman and convenor respectively.

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