With the government postponing a decision on oil price hike to next week, oil marketing companies would see their losses from selling auto and cooking fuels .
Losses to rise by Rs 15,565 cr as decision on oil price hike is delayed
NEW DELHI: With the government postponing a decision on oil price hike to next week, oil marketing companies (OMCs) would see their losses from selling auto and cooking fuels climb to Rs 70,500 crore in the current year, from the Rs 54,935 crore estimated last month.
The new calculation has been done as per the prevailing international price.
Petroleum minister Murli Deora on Wednesday put off a decision on petroleum pricing to next week.
The international crude oil price (Brent) is just about $3 a barrel short of touching the $100 mark. The Indian benchmark (basket) that comprises Dubai/Oman and Brent crude in 60:40 touched $89.36 a barrel at the last closing.
Based on the latest calculations, petrol is being sold at Rs 6.34 a litre less than the international parity price, diesel at Rs 7.88, kerosene at Rs 17.09 and LPG at Rs 211.92 a cylinder.
The options before the government now is to hike the prices of at least petrol and diesel, though kerosene and LPG contribute to the bulk of the under-recoveries, or change the duty structure that may bring relief to OMCs without any change in price.
A combination of both is also possible.
If none of these options is exercised, the government may end up taking the easier route of doling out more oil bonds and asking the oil-producing companies to bear more burden.
Based on the 42.7% burden-share by way of oil bonds, the bond amount may rise to Rs 30,000 crore from the Rs 23,457.24 crore approved by the Cabinet.
“We are trying to see if we can find a solution next week,” Deora told reporters on the sidelines of the India Africa Hydrocarbon Conference here.
Indian Oil Corporation chairman Sarthak Behuria said the company is losing Rs 122 crore a day on selling fuel below cost, while Hindustan Petroleum Corporation Ltd (HPCL) chairman Arun Balakrishnan put the figure for his company at Rs 40-45 crore.
Bharat Petroleum Corporation Ltd said it was losing around Rs 60 crore a day.
Behuria said IndianOil would have to increase its borrowings to Rs 3,000 crore a month if prices were not immediately raised. IndianOil is in a better position than BPCL and HPCL since it has more refining capacity in place.
“People who have more refineries gain,” said Balakrishnan. Refineries gain when international prices rise since they get international parity price for their products.
While BPCL will be marketing about 27 mt of petroleum products and has a refining capacity of 22 mt, HPCL markets 20 mt but produces 16 mt.
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