Cleaning the fuel subsidy mess

The Finance Minister's candid admission on subsidies affecting his sleep will only be cold comfort to public sector oil companies which have been battling the fuel pricing issue for some years now. “Today, things have become so bad that we are content scraping through each fiscal with negligible profits. At least, this will ensure that we can still access loans, unlike Air India, which has been written off by all bankers,” an oil sector official told me recently.
It is unfortunate that even gigantic entities like IndianOil, Bharat Petroleum Corporation and Hindustan Petroleum Corporation are in a difficult situation thanks to the pressure of mounting fuel subsidies and inadequate compensation for losses incurred. This has become a yearly ritual these days, and their top managements have virtually reconciled themselves to the fact that they just have to live with this harsh reality.
Mr Pranab Mukherjee's predicament is understandable, given that the earlier projections of oil subsidies for this fiscal at Rs 24,000 crore have jumped more than five times since. Given a chance, he would ideally like to opt for complete price deregulation, except that it will be politically suicidal to do so at a time when his own Government is constantly walking the tightrope. The only alternative is to continue with these subsidies, except that the fiscal deficit balloon is in danger of bursting any moment.
09./02/12 Murali Gopalan/Business Line

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Categories: Air India Feb 2012, Foreign Feb 2012