With international oil prices on the boil and no respite from the customs duty to be paid on crude in the Budget, the public sector oil companies want to increase the prices of petroleum products to reduce their losses.
As the price of the Indian basket of crude oil has soared past $100 a barrel, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) are losing over Rs 400 crore a day together in revenue on selling petrol, diesel , LPG and kerosene at current prices in the domestic market.
The five per cent customs duty on crude oil is based on the value of the crude imports as a result of which it goes up along with the price of oil and adds to the burden of the oil companies.
IOC director (finance) S.V. Narasimhan said the company is losing Rs 3 per litre on petrol sales, Rs 12.56 a litre on diesel an Rs 24.74 on each litre of kerosene supplied to the public distribution system (PDS). The loss on LPG sales to households works out to Rs 297.80 per cylinder.
He disclosed that the losses for IOC add up Rs 217 crore a day.
While the official policy of the government allows the oil companies to increase the price of petrol when international prices go up, in practice they still wait for the government nod before going ahead.
An empowered group of ministers (EGoM) headed by finance minister Pranab Mukherjee has been entrusted with the task of taking a call on whether diesel, LPG and kerosene prices have to be increased as these are politically sensitive commodities.
The public sector oil companies had on January 15 announced a Rs 2.50 per litre hike in the price of petrol making what the government sees as the "rich man's fuel" costlier by more than Rs 10 per litre over seven months. This was a whopping 22 per cent increase.
The hike in petrol prices has added to the crushing burden on household budgets, already stretched with soaring prices of essential foodstuffs.
Diesel prices have remained constant since it is used in the politically sensitive farm sector while petrol prices have changed six times since June last year.
" We are losing about Rs 3 per litre on petrol," IOC director (finance) S. V. Narasimhan told journalists.
Narasimhan refused to comment on whether the government had asked the oil companies not to raise petrol prices.
He said, " We will revise petrol prices at the appropriate time." " We hope EGoM will take a decision soon (on diesel prices)," he added.
With inflation having become a political hot potato and Parliament in session, petroleum minister S. Jaipal Reddy was guarded on the subject.
" If EGoM on diesel happens, that will happen with your knowledge. You will be informed," he told journalists.
" As and when the decision is taken, you will be told about that. I have nothing to say at this moment," he said.
The three state- run fuel retailers are projected to end the fiscal with a revenue loss of Rs 77,500 crore out of which only Rs 35,000 crore has been provided in the revised budget estimates for 2010-11.
Finance minister Pranab Mukherjee also expressed deep concern over the issue.
" The creeping increase in international crude oil and other commodity prices is a reality that we are already confronting.
The possibility of the global commodity inflation adding to domestic inflationary pressures cannot be ruled out," Mukherjee said in his address at the annual general meeting of Federation of Indian Chambers of Commerce and Industry (Ficci).
Budget worsens woes
After getting no respite from the Budget on the payment of customs duty, the public sector oil cos want to hike prices of petroleum products to minimise their losses
The Indian basket of crude oil has gone past $ 100 a barrel with IOC, BPCL and HPCL together losing over Rs 400 cr per day in revenue on selling petrol, diesel, LPG & kerosene at current prices in domestic market
Playing by the book
Govt's policy allows oil cos to hike petrol prices only when international prices go up.
But in practice they still wait for the government nod before going ahead
Difficult task at hand
The EGoM headed by FM has been entrusted with the task of deciding if diesel, LPG and kerosene prices have to be increased as these are politically sensitive commodities.
Courtesy: Mail Today