Prime Minister Manmohan Singh met the chiefs of the public sector oil companies in order to review their firm’s financial health as the under-recoveries for the year rise. The oil firms are forced to sell the oil below the market price.

A petroleum ministry official indicated that no decision was taken regarding the compensation to the oils firms. Indian Oil, Bharat Petroleum and Hindustan Petroleum together recorded under- recoveries in the range of Rs 21,000 crore from the sale of LPG and kerosene at below-cost rates for the first three quarters of this fiscal year. The petroleum ministry estimates this figure to go up to 30,000 crore by March.

Presently the oil firms incur an under-recovery of Rs 3 a litre on petrol, Rs 2 a litre on diesel, Rs 17.23 a litre on kerosene and Rs 299 on each cylinder of LPG.

The union minister for Petroleum and Natural Gas Murli Deora has requested compensation as bonds for the oil firms from the finance ministry. The finance ministry however did not issue bonds and has still not given any commitment on the compensation.

Concerned with the issue, Deora said, “The OMCs are the backbone of the country’s energy security and, hence, their financial health is a cause of concern for us.”

Bharat Petroleum and Hindustan Petroleum reported losses of Rs 159 crore and Rs 137 crore, respectively while Indian Oil recorded a profit of Rs 284 crore in the second quarter.

As for the compensation for under-recoveries in Auto fuels, the upstream companies like ONGC, OIL and GAIL are sharing the burden by offering discounts. The government is expected to compensate the under-recoveries for the other two fuels, kerosene and LPG under the public distribution system.

Murli Deora is to meet Finance Minister Pranab Mukerjee on Thursday to discuss the status of compensation. The situation has again triggered the debate on the deregulation of oil prices as the Kirit Parikh committee is expected to submit its report on fuel pricing.