MUMBAI, July 23: Oil and Natural Gas Corporation has requested the ministry of petroleum and natural gas to revise the retention price of crude bought by the Indian Oil Corporation to Rs 1,991 per tonne from Rs 1,741 per tonne.

This would mean a difference of around Rs 500 crore to ONGC's internal accruals position, according to sources.

The issue becomes more relevant since the corporation has projected a net profit of barely Rs 872 crore to the petroleum ministry in its memorandum of understanding for 1997-98. This is a steep fall from the figure of Rs 2,035 crore reported in March, 1997. ONGC has also indicated that its profits will be adversely affected if dues from IOC and the Oil Coordination Committee, totalling Rs 1,700 crore, are not paid on time.

These outstandings pertain to the six-month crude purchases by IOC between November and May this year which totalled Rs 1,650 crore and towards which deferred credit was sought. The refining major still owes Rs 1,100 crore and officials admitted that this was going to be a difficult task given the huge outstandings in the pool account, with no signs of a petro price hike.

ONGC's top brass says that crude payments after May have been regular at the normal credit period of three weeks. These are, however, still being done at the old rate of Rs 1,741 per tonne and sources add this is an issue which the government needs to sort out and for which IOC cannot be blamed.

The objective of raising the retention price by Rs 250 per tonne was to ensure that ONGC would be compensated adequately for production cost and also get a reasonable return on investment. While determining the old price level of Rs 1,741 per tonne, refineries had to bear cess at Rs 900 per tonne, royalty at the rate of Rs 528 (20 per cent on the wellhead price plus cess) and 4 per cent sales tax (Rs 127). Hence, at the old retention level, price payable by the refinery was Rs 3,296 per tonne as compared to the average landed cost of equivalent imported crude, inclusive of customs duty, at Rs 5,444 per tonne.

Meanwhile, ONGC has availed itself of a refinancing facility for $106 million without a government guarantee from the International Bank of Japan and Societe Generale.

This has been done to pay off a costly loan and corporation officials said they had got this facility at 48 basis points above Libor for a period of 3.5 years.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.