Centre plans $2.5 billion compensation to oil firms: Report

NEW DELHI: Aiming to shore up huge quarterly losses incurred by state-owned oil marketing companies (OMCs) like Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation, the government plans to pay them $2.5 billion as partial compensation, according to a news agency report.

The losses have been incurred by the OMCs as they absorbed international crude prices, however the report, quoting sources, said that while the Petroleum Ministry had sought a far greater amount, the Finance Ministry agreed only to $2.5 billion as a cash payout.

The partial compensation to OMCs has also been planned to rein in cooking gas prices, the report said. It further said, quoting sources, that the discussions on compensation payout are at an advanced stage though a final decision is yet to be taken.

Though the government plans to ease their financial pain, the Bloomberg report said it would add pressure to the exchequer, which is already burdened by excise duty cuts on fuel prices and a higher fertiliser subsidy, to tackle inflation.

The OMCs use more than 85 per cent of imported oil and benchmarked the fuels they produce to international prices. Those shot up after a global recovery in demand coincided with reduced fuel-making capacity in the US and fewer exports from Russia, thus leading to their losses, the report said.