Fooling all the people all the time

Could Government have avoided charging an extra bite of Rs 5/- per litre per diesel? Every additional Rs 5/- that is priced, Rs 1.50 goes to the Government and Rs 3.50 to the oil company which suffers loss during under recoveries and need to be compensated by Government. This levy will compensate the oil companies for the loss incurred by them in the under recoveries and Government gains Rs. 1,400 Cr. Fine, let us move on.

If we need our economy to be bright, we need capital to flow. Only investment will raise capital. For that foreign flow is a must. FDI in Retail will result in infusion of capital. This will help in more money flow by way of circulation. When money circulates, there is business. And this business will create growth. Growth will cause a higher GDP. Can’t we not invite Foreign Direct Investment, with riders? Asks the Government.

Country cannot afford RBI easing interest rates. All its efforts to tame inflation failed. Inflation is still a matter of great concern. Rupee depreciation is holding up the benefit of our trade balance. This in effect causes tight monetary effect on the country’s economy. Bank is not having enough funds for Credits. We need to bring in reforms. We cannot remain in the paralysis mode all the time. Opposition does not allow the government to perform. They do not give space to government to run Parliament. Second generation reforms cannot be introduced. Prime minister according to them is the villain. But the prime minister says, he is the victim. If subsidy is given priority in a empty balance sheet, deficit which was budgeted at 4.6% rose to 5.9%. Inflation continues to peak at 9%. No body wants sacrifice. Will anybody agree to decrease their salary? Even members of Parliament who get allowances? When production is low, how will the Index of Industrial production performance grow up?  If every state agrees to decrease their Tax on Petrol, Diesel etc, the prices will naturally slip. How many of the opposition ruled states willing to do it? Forsake revenue for the welfare of the people? Economic growth which grew to 9% slipped to 6.5%. How can we revive? If each step Government takes, you oppose, even a small step like that of Armstrong when he put one foot on the moon will make you fall from the moon, forget gravity!  We had a bilateral trade of $ 750 billion during 2011-12. Did you appreciate?

These Oil companies, are they not greedy? Do they not hide many things from us? Let us look at the truth.

Indian Oil Corporation is holding its 53^rd Annual General Meeting. Let us cast our eyes to the Balance Sheet of the Corporation. They registered a turnover of Rs 40,957 Cr. They had the highest ever crude throughput @ 55.62 million metric tones surpassing the record of 52.96 mmt recorded in 2010-11. Distillate yield touched a record level of 77.8% and the refineries achieved the lowest MBN (indicating the combined energy utilization factor). Capacity utilization, one of the benchmarks of refinery performance was over 100% for the 5^th consecutive Year. The operational performance was a Record!!!

Let us continue to look at the profit figures after tax. Profit after tax was pegged at Rs 3,955 Cr. With this huge profit, the Company Board has recommended a liberal 50% dividend coughing off a dividend of Rs 1,214 Cr during 2011-12 fiscal.

Hold your breadth. Last year, the dividend declared was Rs 9.50 per equity share of Rs 10/-. Forget the net capitation value of shares if even 55 is transferred. Cumulative dividend of Rs 20,882 Cr have been paid by the Indian oil Corporation even though the weeping Mr R S Butola, Chairman, IoC was repeatedly weeping about the so-called under recoveries.

Wait a minute. The profit after tax declared by the Company of Rs 3,955 Cr is only one side of the coin.  What has not been said by the company, but written in small point is, Rs 8,156.56 cr being the provision for payment of Entry Tax imposed by the Government of Uttar Pradesh on crude oil received at Mathura Refinery was decreased from the profit of Rs 12,111.56 Cr. That was provisioned, hence the profit is shown as Rs 3,955 Cr. The IoC went to Supreme Court and got a stay. Why do not the parties move the Court for early hearing so that the case could be disposed off.

Now, let us move to the under recoveries. Under recoveries sale of HSD, SKO (PDS), LPG (dom) in 2011-12 are compensated by Government. What the oil companies pay is the interest on working capital expenses involved for borrowing money till the compensation is received by the Government. Barring a) entry tax by UP and b) interest burden, the Report of the Board of Directors of Indian Oil Corporation says that the financial balance sheet is fine!

Another aspect of the Balance sheet. 1473 MMT petrochemical products grew by 62% Y-o-Y. Polymers and PTA were exported to the tune of 76,000 m tones.

The problem highlighted by the Company in the Balance sheet refers to high reliance on borrowings leads to high costs in the form of raising financial costs. The company instead of recycling its money through prudential norms expects 100% compensation from the Government.

Now let us ask our Dy Chairman of the planning Commission, one question: Sir, the profits of the Company, as indicated by the Balance sheet does not reflect the fact that Government’s compensation to cover the entire under recoveries is factored in it. Without factoring this, the profit has come. Add the with held profit amount due to positioning, it is Rs 12,111.56 Cr. Why do you fleet people of Rs 2 and Rs 5 when the management of the IOC with little more adroit skill can manage their finances without any government funding? IOC should be treated as a Public Limited Company. Why is the Government talking the divided from the company? Let it be made a corpus.

When people in the Government do not exercise due diligence, then errors in fiscal policy would cause an economic upheaval, as is happening in India, today. It I not enough we have Economists; we also need Accountants who will point at accounting cover ups. The Comptroller and Auditor General of India. Politicians should remember not to take Coal to Newcastle. Did I say Coal? That includes Coal from Indian mines as well!