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Oil PSUs heading towards bankruptcy as sale of petro products below market prices hurting firms

Oil PSUs heading towards bankruptcy as sale of petro products below market prices hurting firms

A parliamentary committee warns that public sector oil companies Indian Oil, Bharat Petroleum and Hindustan Petroleum are heading  towards bankruptcy.

A parliamentary committee on Friday warned that public sector oil companies Indian Oil, Bharat Petroleum and Hindustan Petroleum were headed towards bankruptcy.

The report of the standing committee states that the oil companies have already availed Rs 1,30,000 crore worth of cash credit limit from banks as they were saddled with under-recoveries of Rs 1,40,000 crore in 2011-12 on the sales of petroleum products below market prices. This figure is expected to shoot up to Rs 1,50,000 crore during 2012-13 "The committee feels that continuance of this position would make these oil companies financially unviable," the report points out.

The committee has recommended that the supply of subsidised LPG to rich households should be stopped and a higher tax should be imposed on purchase of diesel cars as they consume subsidised fuel. The committee wants the oil companies to start collecting information on their customers, which will help in data mining, so that the betteroff sections can be identified in order to take decisions to target the subsidies to the more deserving and poorer sections. It wants rich households to pay the full market price for LPG, which is currently being subsidised to the extent of Rs 550 per cylinder.

The committee said it was surprised that the oil companies do not have any information on their customers like economic status and family size. The committee has also recommended that in order to discourage the tendency to buy or switch to diesel vehicles to take advantage of lower prices of the subsidised fuel, the petroleum ministry should take up with the finance ministry the issue of imposing a cess or tax on the purchase of diesel cars and utilise it to fund the underrecoveries of the oil companies.

Courtesy: Mail Today