People's Democracy

For Whom The Hearts Bleed - Navaratnas Or North Block?

Dipankar Mukherjee

“IF we don’t let our navaratnas glow, energy security will cease to grow” – that’s how the ad-campaign by Ministry of Petroleum & Natural Gas starts for justifying what it calls a minimum increase in price of diesel and petrol. As a matter of fact prime minister also time and again had made pointed reference to financial distress of some navaratnas in petroleum sector. The navaratnas, referred by Ministry of Petroleum & Natural Gas and the prime minister are obviously the three public sector Oil Marketing Companies (OMCs) i.e. Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) which are bearing the brunt of steep increase in crude oil prices in the international market, unlike the private oil refiners who take the maximum advantage of high refining margin in the present import-parity pricing mechanism without sharing any part of the same with economically vulnerable sections of the country. Minister of Petroleum & Natural Gas, went so far as to say, “we are also keen to avoid excessive damage to the financial health of our oil PSUs” and price hike as per him was the only option to ensure the same. Amusingly, even the corporate media, which a couple of years back during the NDA regime was waxing eloquent over the need of privatisation/disinvestment of two of these navaratnas viz. BPCL and HPCL, is also shedding tears over the financial health of these navaratnas.

FINANCIAL RESULT OF IOCL

In above background the financial result of IOCL, the biggest of the three navaratnas, for the year 2005 – 2006 makes an interesting reading. As per the audited consolidated result for the year ending March 31,2006 profit after tax is Rs. 5115.90 crore. However, this comfortable profit figure has been achieved because an amount of Rs. 6571 crore has been received from government of India in March 2006 in the form of special bond in lieu of under-realisation on sale of kerosene and LPG. Otherwise, the company would have been partly in red and the government (or Union Finance Ministry in the North Block) seems to be benevolent in extending the grant, to sustain the profit of IOCL.

ASWADHAMA HATA ITI KUNJORAHA !

Is it so? A little deep examination reveals the following:

Against product sale of 48.86 million tonne of IOCL in 2004 – 2005, the product sale in 2005 – 2006 was marginally less i.e. 47.52 million tonne. However, the excise duty paid was Rs. 22796 crore in 2005 – 2006 against Rs. 16762 crore in 2004 – 2005, which means a net gain of Rs 6034 crore to North Block even though the product sale was comparatively less! Other gains in the tax front are in the current tax for the year 2005 – 2006, which is Rs 1945.02 crore against 1384.75 crore in 2004 – 2005, a gain of another Rs. 560 crore approximately. Add Rs 62.94 as fringe benefit tax which was nit last year. Add all the three and you find more than Rs. 6571 crore has been gained through tax and duty in the year 2005 – 2006 !

WHO IS CAUSING EXCESSIVE DAMAGE TO THE FINANCIAL HEALTH

But the shocking revelation is para (c) of the “Notes” to financial result of above navaratna which says, “The Board of Directors has recommended final dividend @ 125 per cent which works out Rs 1460.02 crore. The total dividend for the year 2005 – 2006 works out to Rs 1460.02 crore as against Rs 1693.62 during 2004 – 2005”.

So an amount of more than Rs. 3000 crore as dividend has been paid during last two years to North Block, when IOCL the biggest of the three navaratna OMCs is reportedly and truly under a financial stress. On one hand Ministry of Petroleum & Natural Gas is referring to forecasts which suggest that price of crude is likely to touch even higher levels in the coming month, on the other hand, it allows navaratna PSU like IOC to be literally fleeced to this extent by Union Finance Ministry. Petroleum Minister is hopping from Mumbai to Chennai for getting a relief of Rs. Rs 150 – 200 crore odd from one state or the other, when North Block gets away with an additional Rs 6656 crore tax and duty in 2005 – 2006 along with a dividend of more than Rs 3000 crore in two years. Would any private company pay a dividend @ 125 per cent if its financial health is as bad, as being projected by the government in its ad-campaign for OMCs? When the prime minister says, “However we can not continue to subsidise energy consumption on this scale”, the pertinent question from the common man is “But how long we will allow revenue mobilisation through taxes & duties and cess on petroleum products alone”? UPA government has to answer for whom their hearts are bleeding – navaratnas, common man or NORTH BLOCK?