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Kerosene subsidy to continue, 7 MNCs in race for LNG projects, oil pool account has surplus, says minister

Petroleum Minister Vazhapadi K Ramamurthy has said the present quantum of subsidy on kerosene would continue even after complete dismantling of the administrative price mechanism by the year 2002.

Addressing a news conference after signing production sharing contracts for six blocks in New Delhi, Ramamurthy said no government could afford to stop the subsidy on kerosene. The budget would cover 33 per cent of the cost in the coming years.

He said the group which had recommended the dismantling of the administered price mechanism did not address the issue of subsidy on kerosene. It had, however, recommended that the subsidy on liquefied petroleum gas be reduced by Rs 30 to 35 per cylinder. But the government in its wisdom decided not to hike the prices of LPG in the current budget.

The minister said as many as seven international companies have submitted bids to supply liquified natural gas to terminals being put up at Dahej in Gujarat (five million tonnes) and Cochin (2.5 million tonnes). Seven more ports have been selected for putting up LNG facility.

The government has also cleared two major refinery projects at Bina in Madhya Pradesh and Paradeep in Orissa which have been languishing for more than five years on environmental grounds. The process of investment of over Rs 130 billion will start in the next two or three months, he said.

The minister said the oil pool account will continue to have surplus this year following the all-time low in prices of crude oil in the international market and steady deterioration in the rupee value against the US dollar. He, however, declined to quantify the surplus.

He disclosed that there was surplus since September 1997. The oil import bill is expected to be $ 7.5 billion (Rs 350 billion) during 1998-99, marginally lower than last year because of the low prices of crude. The crude prices, he said, are expected to go up by October this year.

He said the disinvestment of the state-owned Indian Oil Corporation and the Gas Authority of India would take place as scheduled this year but the core group would decide the time and the premium to be charged for the shares.

To a question, the minister said the long-pending dispute between the Madras Refineries and the Southern Petrochemical Corporation over the aromatic project near Madras would be resolved shortly and the petroleum ministry is working out a formula. He, however, declined to disclose the type of formula being worked out to end the four-year-old dispute.

Ramamurthy said the ministry today signed production sharing contracts for six blocks covering an area of 20,970 square kilometres in various parts of the country. The blocks include areas in Rajasthan, Gujarat, eastern coast (Krishna-Godavari offshore) and western coast (Gulf of Cambay, Assam and Arunachal Pradesh). The initial investment expected in the first phase of the project will be around $ 20 million.

The second round of contracts for 12 more blocks is expected to be signed next month.

He said the country's crude oil production, which is now hovering around 27 to 28 million tonnes per annum, is expected to touch forty million tonnes by the terminal year of the Ninth Plan.

With the refining capacities expected to go up substantially during the next five years, there will be a decline in import of the expensive petroleum products. Consequently, the foreign exchange outgo on oil import account will not go up substantially in the coming years, he said.

UNI