Government studying CAG report on overcharging by oil firms

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SME Times News Bureau | 22 Jul, 2014
The government Monday said it is studying the official auditor's observation that state-owned oil companies overcharged customers for five years by Rs.26,626 crore.

"The subject is being studied by the government," Petroleum Minister Dharmendra Pradhan told the Lok Sabha responding to a query on the issue.

In its audit report last week, the Comptroller and Auditor General (CAG) said state-run oil marketing companies (OMCs) overcharged consumers around Rs.26,626 crore by adding notional charges such as customs duty on domestic sales to the actual costs of petroleum fuels over a period of five years, even as they paid more than necessary to buy fuel from private refiners like Essar Oil and Reliance Industries.

The report said prices of petrol, diesel, domestic LPG and kerosene are calculated by adding customs duty, freight, insurance, ocean loss and wharfage charges to the prevailing international prices of these products.

The matter was raised by CPI-M member P. Karunakaran during Question Hour.

Responding to another query, Pradhan said the country's total demand for petroleum products for the current fiscal is estimated to be nearly 160 million metric tonnes.

To meet rising demand, the government is setting up strategic crude oil reserves at three places through the Strategic Petroleum Reserves Ltd. (ISPRL) at Visakhapatnam, Mangalore and Padur, the minister said.

"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.

Other steps being taken to raise oil and gas production include implementation of improved oil recovery and enhanced oil recovery schemes by state-run explorer ONGC from ageing fields, increased efforts to acquire oil and gas assets abroad and enhanced exploitation of shale gas reserves, he added.