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India's oil pool account deficit soars: Naik

India's oil pool account deficit will rise to Rs145 billion in March 2002 from Rs 126 billion a year ago, Petroleum Minister Ram Naik told a seminar on Thursday.

The account is a cross-subsidy scheme that compensates firms for selling kerosene and cooking gas below cost, and gives marketing firms a 12 per cent return on capital employed.

It helps the government maintain a steady price of petroleum products. If the administered prices of products are not changed, the account swells when global crude prices fall and shows a deficit if they rise.

The system will change next April when the administered price mechanism will be removed and the deficit in the account due to subsidies will have to be met with a provision in the central Budget.

"It is necessary that efforts are made to reduce the deficit before dismantling APM," Naik said.

A finance ministry official said the government would assess how much of the subsidy was "compensatable".

"We have to look at what constitutes the oil pool deficit," Revenue Secretary S Narayan told the seminar.

He said the government would pay the deficit after price controls were lifted, but it would "look into what constitutes the deficit."

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