The domestic oil marketing companies have received an unexpected Rs 6,300 crore (Rs 63 billion) bonanza from the government.

The finance ministry is learnt to have decided to write off this amount, which, according to the Comptroller and Auditor General, the companies had overdrawn from the oil pool account.

A helping hand

The CAG audit for 1993-98 had pointed out that the state-owned oil marketing companies had drawn an extra Rs 6,300 crore from the oil pool account as reimbursement for corporate tax payments Half of this was paid to Indian Oil Corporation, and the balance to Hindustan Petroleum and Bharat Petroleum in almost equal proportions While the companies had been reimbursed on the basis of notional corporate tax payments, the amount of corporate tax they actually paid was around Rs 4,000 crore less

The finance ministry's decision to waive the repayment was conveyed to the petroleum ministry at a recent meeting, officials said, adding that the proposal would be sent to the Cabinet for approval.

Finance ministry officials said it was for the petroleum ministry to submit an action taken note to the Comptroller and Auditor General on the issue. The finance ministry was not required to approve it, they said.

This will clear the way for the oil companies to remove uncertainties from their balance sheets, and help in better evaluation of these companies while raising funds from the market or in the case of divestment in any of them.

The issue has been hanging fire for quite some time, with the finance ministry insisting on the repayment of this amount and the petroleum ministry arguing against it.

While the finance ministry had said the amount could not be written off because such a move would set a bad precedent for other government companies, the petroleum ministry insisted that it would act as a damper on the evaluation of the companies.

The Comptroller and Auditor General's audit for 1993-98 had pointed out that state-owned oil marketing companies had drawn an extra Rs 6,300 crore from the oil pool account as reimbursement for corporate tax payments.

While the companies had been reimbursed on the basis of notional corporate tax payments, the amount of corporate tax they actually paid was around Rs 4,000 crore (Rs 40 billion) less.

Tentative estimates put the extra reimbursement made to the oil marketing companies at Rs 6,300 crore, considering that the oil pool account was in operation from 1978-2002.