With the brouhaha over the Indo-US nuclear deal scuppering the possibility of a hike in auto fuel prices, oil companies are in a tight spot.
NEW DELHI: With the brouhaha over the Indo-US nuclear deal scuppering the possibility of a hike in auto fuel prices, oil companies are in a tight spot.
The government had earlier hinted at a hike in prices after the end of the monsoon session on September 14. With the political climate not at all conducive for such a course, oil companies will be hit harder.
Finance ministry officials acknowledged that the government will now have to look for a solution to the hardship of oil companies, without a hike in the retail prices of petroleum products.
“An upward revision in the prices of petrol and diesel is not an option any longer,” an official said. Sources said since the Left has made it clear that the support to the United Progressive Alliance government would be issue-based hereon, there might be more vociferous objections to any price increase, unlike last year.
That leaves the government with only one option — a two-way burden- sharing mechanism, instead of the normal three. Issuance of oil bonds and burden-sharing between oil companies would be the only way out now. The third option of price hike is out.
“Without a hike and oil bonds, we may end up with losses in the second quarter,” said an Indian Oil executive. To boot, oil companies do not have the cushion of an appreciating rupee in the current quarter, as they had in April-June.
He said the refinery margin, though high, was not as good as the first quarter.
The only heartening news for IndianOil is that its losses in the current fortnight has come down by Rs 10 crore a day to Rs 85 crore.
This is because the August average of the Indian basket of crude at $69.75 (last closing on August 16 was $67.91) was lower than July levels. Besides, there has been a 47% decrease in the loss figure for petrol. Based on fortnightly calculations, as on August 15, IndianOil, BPCL and HPCL are currently selling petrol at Rs 2.80 a litre below the trade parity price.
The figure stood at Rs 5.9 per litre at the beginning of the month. Interestingly, unlike the usual trend, the under-recovery figure for petrol is less than that of diesel, which is selling at Rs 4.68 below trade parity price. The price situation for liquefied petroleum gas and petrol, at Rs 178 a cylinder and Rs 15.50 a litre, respectively, continues to be disturbing for oil companies.
“Companies expected oil bonds for the first two quarters to come before September-end, but now it appears they would come only in third quarter, after Parliament approves the supplementary demands for grants in the winter session,” said an official.
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