Petroleum Minister Murli Deora will request the Prime minister’s to help secure bonds for the state-run oil marketing companies as they have to be refunded for selling cooking fuels below the market rate.

Earlier the Petroleum Minister’s request for Rs 31,700 crore as bonds to be issued next month was declined by the finance ministry. The bonds are to compensate state run firms for selling kerosene and LPG below market rates. The finance ministry said that this year the under-recoveries were similar to that for the year 2006-07 and hence agreed to offer only 33 per cent in bonds as it had then.

Prime Minister, Dr Manmohan Singh is to meet the chiefs of the public sector oil companies on Wednesday. Petroleum Minister, Mr Murli Deora, and the Finance Minister, Mr Pranab Mukherjee are also expected to attend the meeting.

The finance ministry suggests the same arrangement that was applied in 2006-07 which saw leading firms like ONGC and Oil India Ltd contributing one-third and OMCs taking the remaining one- third. However in the last fiscal year the finance ministry compensated nearly 80% by issue of bonds.

The petroleum ministry is concerned as the OMC will face additional loss of Rs 5,000 crore on diesel and Rs 3,000 crore on petrol over the top of losses incurred in selling kerosene and LPG. It demands that the government pay for the losses incurred by selling cooking fuel as promised while upstream firms will share the burden of selling auto fuels. Murli Deora is also prepared to recommend freeing of the pricing of oil.

Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation made gains in the quarter but if they have to the share the burden of selling below market, it can turn into losses.

Kirit Parikh Committee is to submit a report on the pricing of the four fuels sold under public distribution system. Prime minister has decided to discuss the petroleum sector along with country’s energy security and exploration with the finance minister Pranab Mukherjee.

ONGC has recommended a special oil tax (SOT) or windfall tax on crude oil producers if the price is over $60 a barrel. Another suggestion is to take 20 per cent of the incremental price over $60 a barrel for the purpose of subsidizing petrol, diesel, LPG and kerosene with 40 per cent of increment above $70 to be taken as windfall tax, 60 per cent for anything over $80 and 80 per cent on $90 plus a barrel.

The discussion on deregulation of the oil prices is more than a decade old with Sundararajan committee report and later Nirmal Singh-led expert committee recommendations and then concluding with R-Group with the Chaturvedi and Rangarajan panels. Both the public and private sector petroleum firms are suffering losses while Reliance had to shut down all their retail outlets.

The private sector firms also demand an equal compensation to be able to compete with public sector firms on an equal footing. They agree to the suggestion of deregulation but only for petrol and diesel as the losses arising form the sale of the other two, kerosene and LPG account for nearly two-third of the losses.