Bonds soon to wipe out oil pool deficit

By Our Special Correspondent

NEW DELHI, OCT. 22. The Centre is considering wiping out 80 per cent of the oil pool deficit by issue of bonds as well as creating two regulatory agencies for the upstream and downstream segments of the petroleum industry. The issue of reducing subsidy on kerosene and LPG will, however, be examined in the budget proposals for the year 2002-3.

This was disclosed here today by the Petroleum Minister, Mr. Ram Naik, after a two-hour meeting with the Finance Minister, Mr. Yashwant Sinha, on ways to dismantle the administered pricing mechanism (APM) for oil products by April 2002. Mr. Naik said the reports of two sub-groups set up to study various aspects of APM dismantling were discussed during the meeting.

The reports of other groups will be considered at later meetings after which a final decision will be taken on all aspects of the dismantling process. Mr. Naik is now scheduled to meet Mr. Sinha on these issues on October 31.

On the issue of bonds for the oil sector, he said they will be seven year bonds and would liquidate up to 80 per cent of the pool deficit which currently stands at abou Rs. 13,000 crores. The interest rate and other details of the bonds issue which would carry the Government's sovereign guarantee are being worked out, he said.

As for the balance 20 per cent deficit, he said the Comptroller and Auditor General (CAG) would conduct a special audit into the oil pool account to assess the exact amount of outstandings due to the national oil companies. Bonds for the remaining 20 per cent would only be issued after reconcilisation of these accounts, he said.

On the proposed new regulatory bodies for the oil sector, he said one would be for the upstream and another for the downstream segments. A draft legislation for this purpose has already been finalised by the Petroleum Ministry which has now to be cleared by the Law Ministry.

Asked about the sensitive issue of reducing subsidy on kerosene to 33.3 per cent and LPG to 15 per cent by raising prices, Mr. Naik said this would be dealt with in the budget.

He noted that prices would have to be raised by 41 and 45 per cent respectively for the two products to bring subsidy to a residual level. This would amount to Rs. 1.20 per litre for kerosene and about Rs. 100 per cylinder on LPG.

He conceded that doing this in one go would not be practical. It would thus be dealt with in the general budget next year along with the issue of duty changes, he said.

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