Government To Consider Financial Cushion For OMCs To Prevent Defaults: Hardeep Singh Puri

Oil marketing companies should be provided with a “financial cushion” to prevent them from defaulting, according to Union Petroleum Minister Hardeep Singh Puri.

The minister was responding to a question from BQ Prime at a technology event held on Thursday in Mumbai regarding state-run oil marketing companies such as Indian Oil Corp. Ltd., Bharat Petroleum Corp. Ltd. and Hindustan Petroleum Corp. Ltd. suffering marketing margin losses as the regulated retail fuel price for automobiles has remained unchanged since April 6.

“As a line minister, I have to worry about their (OMCs) financial health,” Puri said. “I know they are financially strong companies, but they have to borrow.”

“After a while, if they are not provided the financial cushion, the last thing one would want in a challenging global environment is for these Maharatanas to start to default. We are looking at various methods of doing it,” Puri said.

With respect to providing subsidies to OMCs for auto fuel, the minister said, “Subsidy is a charge on the state exchequer, so one has to find another way of addressing the issue.”

There have been reports about the Finance Ministry’s plan to support OMCs using proceeds received from windfall tax on fuels. However, the minister replied in the negative, saying that he was “not aware” of any such discussions.

On a question pertaining to why domestic natural gas is not being fully allocated to city gas distribution companies to prevent the rise in prices of CNG and PNG, the minister said that as consumer interest is supreme, so priority was given to CGD. But other sectors, such as power and fertilizers, cannot be neglected as they were given assurances decades ago when they had set up their plants, he said.

“Within that framework, we are doing our best for the CGD. Maybe, as we go along, it may get reviewed,” Puri said.

Kirit Parikh Panel On Gas Price Review

On the formula for pricing domestic gas prices, Oil Secretary Pankaj Jain said the panel under Kirit Parikh is still working on it and unless the report comes out by Sept. 30, commenting on it would be academic.

“Let the report come out, then we will decide how to take it forward,” Jain said.

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