Panel to examine oil firms’ financial health


New Delhi : Prime Minister Manmohan Singh Wednesday set up a high-powered committee to examine the financial position of state-run oil companies against the backdrop of soaring crude oil prices.

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The decision was taken hours after the government decided to hike prices of diesel and petrol by Rs.3 and Rs.5 per litre, respectively, and that of cooking gas by Rs.50 per cylinder.

One of the key references of the committee is to “examine the impact of increase in oil prices between 2004-05 and 2008 on the financial position of oil companies, including upstream exploration companies, refiners and downstream oil marketing companies (OMCs).”

Planning Commission member B.K. Chaturvedi will head the committee. Its other members are Saumitra Chaudhuri, member of the Prime Minister’s Economic Advisory Council, and Arvind Virmani, chief economic advisor to the government of India.

The committee will also analyse the cash flows and the profitability of all oil companies so as to get a clear picture of the changes taking place in their operating positions, particularly the impact on access to credit and cash availability for their operations.

It will “revisit the concept of under-recoveries and examine the reported deficit and the real deficit faced by OMCs as a result of price constraints imposed on them.”

A press statement issued by the Prime Minister’s Office (PMO) said the committee will also “estimate the financial needs of the refiners and OMCs in order to continue their normal business activities and to meet the energy needs of the economy and the possible sources of funds to meet their financial needs.”

The committee will “examine the available options for burden sharing by all stakeholders, including upstream exploration companies, refiners, downstream OMCs and stand-alone refiners.”