The finance ministry is understood to have agreed to issue oil bonds to compensate 50 per cent of the losses suffered by oil companies last fiscal on account of selling fuel below cost price.
Petroleum Minister Murli Deora had met Finance Minister P Chidambaram seeking issuance of oil bonds by the finance ministry to cover 57.1 per cent of the losses or under-recoveries of state-run oil marketing companies.
The finance ministry, which agreed on Rs 70,579 crore (Rs 705.79 billion) as the size of losses for the purpose of compensation, will be issuing oil bonds worth approximately Rs 35,300 crore (Rs 353 billion), which will cover 50 per cent of the losses incurred by oil firms, official sources said.
As of now, oil bonds worth Rs 20,333 crore (Rs 203.33 billion) have been issued for the period between April-December 2007, which leaves about Rs 15,000 crore (Rs 150 billion)
to be covered.
"We have asked (for covering) 57.1 per cent (of losses with) oil bonds. And they are not ready for it. So we have requested him (Finance Minister) to issue as much as possible," Petroleum Minister Murli Deora told reporters in New Delhi after the meeting.
To a question on increasing domestic fuel prices, Deora said there was no discussion on it and that it was a policy decision that could be decided only by the Cabinet.
Petroleum Additional Secretary S Sundaresan said the two minister did not discuss whether the bonds would be taken as mandatory requirement for banks to park their funds in government securities, known as Statutory Liquidity Ratio.
Deora said there was no programme to meet Prime Minister Manmohan Singh on the oil bond issue.
Compensation to oil companies for under-recoveries in this fiscal was yet to be firmed up.
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