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Corporate Jun 30, 2012

Will oil companies get to cut govt interference, losses?

By Firstbiz Staff

Will oil companies be able to ward off government interference, finally?

Taking a giant step towards improving transparency and corporate governance in the public sector, the Standing Committee on Finance has suggested that public sector units must disclose the impact of government's directives have on their financials.

"The move is prompted by the Comptroller and Auditor General's suggestions that some of the government directions to PSUs may have financial bearing on companies and need to be disclosed to ensure greater financial transparency," a report in The Economic Times said today.

TCI has threatened arbitration against Coal India for signing, fuel supply agreements with power companies. Reuters

The Standing Committee's recommendation comes in the report on the Companies Bill, which was submitted on 26 June.

The move, if adopted by the government, will make government officials more cautious while dealing with PSUs of their respective ministries. The report says the committee had on its mind the case of the tussle between The Children's Investment (TCI) Fund and state-run Coal India management.

TCI has threatened arbitration against Coal India for signing, under a government directive, fuel supply agreements with power companies. These agreements have since to revised to be more balanced without being loaded against Coal India.

Another case in point is the public sector oil companies, which take pricing decisions as per the government's instructions. Petrol and aviation turbine fuel are the only ones decontrolled.

Diesel, kerosene and cooking gas are administered and are sold at subsidised rates. An ICICI Securities report had estimated the under-recoveries of the state-run oil companies at Rs 1.52 lakh crore for this financial year. If the committee's suggestion gets through, the companies may get a chance to reduce their losses since government will either have to reimburse them fully or allow them to raise prices based on global crude levels.

by Firstbiz Staff

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