The last hitch in offering a package of fiscal sops to oil-exploration companies was cleared recently, when the law ministry accepted the petroleum ministry's interpretation of Section 42 of the Income Tax Act. Union petroleum minister Vazhapadhy K Ramamurthy told newspersons on Thursday that the petroleum tax guide, the model production-sharing contract, the notice inviting offers and other documents had been finalised.

The minister announced a series of New Year resolutions, including roadshows for 48 exploration blocks being offered as part of the Nelp by the last week of January. He also hinted at rolling back part of the subsidy on liquefied petroleum gas (LPG), and resolved to keep the subsidy on kerosene.

The minister hinted at a reduction in diesel prices in the New Year. Petroleum secretary TS Vijayaraghavan said thatdiesel prices could not be brought on a par with international rates so far because of the frequent fluctuations in oil prices. Diesel prices were last revised in May.

"There is no going back on the administered price mechanism (APM)," Ramamurthy said, adding, "except on subsidy on kerosene." Beginning April, the roughly 40 per cent subsidy on kerosene and LPG was scheduled to be rolled back in phases, till only 15 per cent subsidy remained on LPG and 33 per cent on kerosene by 2002.

The subsidies, which come from the oil pool account, were to be passed on to the union budget. The BJP-led coalition government, however, decided to skip the subsidy roll-back scheduled for this fiscal.

"We have till March 1999 to think about the subsidy on LPG," Ramamurthy said, adding that the subsidy on superior kerosene oil (SKO) would stay, as it was meant for the "poorest of the poor".

The roadshows for the Nelp will begin in January-end, and continue till February second week. The promotion tour for the 10 onshoreand 26 offshore blocks on offer will cover New Delhi, London, Houston, Calgary, Singapore and Perth.

The bids will close in May. The petroleum tax guide was held up for so long because North Block was not sure whether Section 42 of the IT Act should be interpreted to enable oil companies to set off investments in exploration against income from producing fields on an annual basis.

A nod from the law ministry has now ironed out the hitch. The Nelp will for the first time put national oil companies and multinationals on the same footing, apart from offering never-before sops like exemption from cess and concessions on royalty.

The minister said that the deficit in the oil pool account (which is used to cross-subsidise LPG and kerosene from the earnings from petrol and aviation turbine fuel) had dipped to Rs 7,000 crore from Rs 12,984 crore in March. "We hope to wipe out the entire deficit by April 1, next year," he said.

Ramamurthy also announced plans of amortising all the oil bonds equal to the duesof the oil companies by March-end next year. The centre owes the oil companies Rs 4,500 crore by way of retained gains from the sale of controlled petroleum products.

He said the oil import bill this year was expected to be $8.4 billion, or roughly the same as during last year, adding that it could be even less. The low import bill is the result of a downtrend in the prices of crude oil and petroleum products in the global market and the slow growth in oil consumption at home.

Ministry brass explained that oil consumption was growing by a modest 6.1 per cent, against the 10 per cent anticipated. Indians would have consumed 90 million tonnes of petroleum products by March-end next year, compared with 85 million tonnes during 1997-98.

Ramamurthy made tongue-in-cheek references to rumours that he was about to step down from office to please some factions of the multi-party coalition. "All I can say is that the prime minister is happy with my work, and I still have my job," he quipped.

Fielding queries onissues that had raised dust during the year, the minister clarified that the petroleum ministry had approved an agreement signed between Indian Oil Corporation and two private-sector oil refineries. "Reliance Petroleum and Essar Oil will begin production next year, but will not be allowed to market their petroleum products before 2002," he said.

The petroleum ministry has approved Indian Oil's decision to lift half the licensed capacities of Reliance Petroleum and Essar Oil. The remaining 50 per cent of the products processed at these refineries would be marketed by Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL), Ramamurthy said.

Reliance Petroleum's refinery at Jamnagar is believed to have a licensed capacity of 24 million tonnes, while Essar Oil's refinery in the vicinity is rated to have a capacity of 10.5 million tonnes. The minister clarified that should the refineries go in for capacity additions in future, Indian Oil would be authorised to lift half of the augmentedcapacity as well. Reliance and Essar will be entitled to import parity in pricing their products.