Petroleum Minister Murli Deora and his junior Jitin Prasada lock horns over the unfairly long period of credit allegedly extended to Kingfisher, which buys fuel from government-controlled HPCL
Petroleum Minister Murli Deora and his junior Jitin Prasada lock horns over the unfairly long period of credit allegedly extended to Kingfisher, which buys fuel from government-controlled HPCL
King of good times Dr Vijay Mallya inadvertently created a rift between two ministers in the Ministry of Oil and Petroleum because of his penchant for delaying payment to government-owned oil companies he buys fuel from, including Hindustan Petroleum Corporation Limited (HPCL).
Reason for rift
While Murli Deora, the minister for petroleum and natural gas, reportedly wants to go soft on Mallya-owned Kingfisher Airlines, whose dues are piling up, his junior Jitin Prasada is up in arms against HPCL who he has pulled up for unduly favoring the carrier by extending credit facilities beyond deadline without a bank guarantee despite his instructions to not do so.
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| Vijay Mallya, chairman, Kingfisher |
A source in oil ministry said the issue has resulted in bad blood between Deora and Prasada. "It even led to heated arguments between the two.
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If Kingfisher does not pay soon, it will only widen the gap between Deora and Prasada further," added the source.
Kingfisher purchased jet fuel worth Rs 600 crore on credit from HPCL against a corporate guarantee issued by its group company United Breweries & Holdings.
When the due amount mounted alarmingly, in March this year, the oil ministry asked HPCL to convene a special meeting and stop credit facility to the airlines.
Part paymentThe oil company did not press its case after Kingfisher paid up a meagere Rs 63 crore, which is a little over 20 per cent of the amount the airline owes to HPCL.
Surprisingly, HPCL not only extended the credit facility to the airline up to June 30 without recovering old dues but also ignored a government's order that demanded that the Rs 250 crore corporate guarantee be invoked to recover the dues.
"The government order was sent out at the behest of Prasada and the oil company was able to defy it because Deora was on the airline's side," said a source in HPCL.
The government practically owns HPCL by virtue of its holding a little over 51 per cent. Prasada was understandably miffed that his order was ignored.
"He was so upset over the issue that he wanted an enquiry into it. He also wanted to punish some HPCL directors.
This did not happen because Deora stood firmly in his way, which only worsened the situation in the ministry," said the source.
Last week, Prasada came out publicly on this to say, "It is important that the HPCL board keeps me informed about the decisions they make.
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I am answerable to the Parliament and the public. I am getting information from other routes except from the board, where it should come from."
Not favouring anyone?In an official response, L M Motwani, a spokesperson for HPCL said, "There is no question of favouring any airline, including Kingfisher.
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That is all I can say at this moment. Please don't expect any comments from us on politics."
In an e-mail response, a Kingfisher spokesperson said, "Supplier relationships are confidential and we will not comment publicly.
In any case, we are in full compliance with the credit terms as mutually agreed from time to time with ATF suppliers."
Neither Murli Deora nor Jitin Prasada could be contacted for comment despite repeated attempts.
| king of big dues |
| Kingfisheru00a0 owes Rs 314.33 crore to BPCL as on March 2009 and another Rs 30.71 crore to IOC, taking total outstanding dues to nearly Rs 900 crore.
It paid Rs 40 crore to BPCL recently, and has agreed to pay Rs 10 crore every month.
HPCL continued to supply fuel to Kingfisher despite BPCL suing the airline for continued default.
Interestingly, HPCL made a profit of Rs 1301 after taxes in 2009-10 registering a growth of 3.5 per cent. |
