Government studying CAG observations on oil companies, says Pradhan

Mumbai: The government said it is studying CAG's observation that state-owned oil firms overcharged customers by Rs 26,626 crore in five years.

In its audit report, the Comptroller and Auditor General (CAG) observed that state-owned oil firms overcharged customers by Rs 26,626 crore in five years by charging notional levies like customs duty on fuel they sold. Responding to a query on the issue, Minister of State for Petroleum and Natural Gas Dharmendra Pradhan informed the Lok Sabha that the "subject is being studied by the government". The matter was raised by CPI-M member P Karunakaran during Question Hour.

In the report on 'Pricing Mechanism of Major Petroleum Products in Central Public Sector Oil Marketing Companies',the top auditor has said price of petrol, diesel, domestic LPG and kerosene is calculated by adding customs duty, freight, insurance, ocean loss and wharfage charge to prevailing international price of these products. Responding to another query, the Minister said the country's total demand for petroleum products is estimated to be nearly 160 million metric tonnes in the current fiscal. As per oil import estimates for 2014-15, the projected demand of crude oil for processing during this period is estimated at 223.7 million metric tonnes (MMT).

Out of the total, 188.2 MMT would have to be imported while 35.5 MMT would come from indigenous production. "The total demand for petroleum products for the year 2014-15 is projected to be 159.98 MMT," he said. To meet the rising demand, the government is setting up strategic crude oil reserves at three locations through Strategic Petroleum Reserves Ltd (ISPRL). The locations are Visakhapatnam, having storage capacity of 1.33 MT, Mangalore (1.5 MMT) and Padur (2.5 MMT). "The Visakhapatnam project is expected to be completed by the end of this financial year, whereas the Mangalore and Padur projects are expected to be completed next year," Pradhan said.