The Hindu Business Line : High cost of LPG imports to hit oil marketing cos

IT'S not only the housewife who has been hit by the cooking gas (liquefied petroleum gas) crisis; joining her are oil marketing companies (OMCs) such as Indian Oil Corporation Ltd, Hindustan Petroleum Corporation and Bharat Petroleum Corporation.

The OMCs, which have been asked to import LPG to meet the shortfall of almost half a million tonnes, might have to take a hit on their revenues on account of additional imports.

Rough estimates suggest that the companies may take an additional hit of about Rs 3,000 crore on account of imports. The OMCs are expected to import 3,51,000 tonnes of LPG from October to December to meet the local demand-supply gap. The companies in all will import 27 cargoes. (Each cargo will bring in 13,000 tonnes of LPG.)

LPG prices today stand between $525 and $530 per tonne. The landed price for domestic OMCs would be close to $600 per tonne, as it has to be transported in a special tanker for which freight rates have moved up to $75 per tonne.

Official sources said that IOC, which is sourcing LPG for OMCs, is negotiating with companies in the Gulf for the imports and the OMCs are expecting almost 22 cargoes in October-November.

The sources pointed out that the imports, coupled with the under-recovery on account of the selling price being below the cost price, are likely to affect profits. The third quarter of the current fiscal (2005-06) is expected to be even worse than the first two as far as LPG is concerned, since additional imports are going to push up the input costs, while the end-product price would remain unchanged, the sources added.

In a recent letter to the Petroleum Ministry, the OMCs have once again reiterated their demand for a price revision on LPG and superior kerosene oil (SKO).

The companies have sought an increase of Rs 13 per litre in SKO and Rs 121 per 14.2-kilogram cylinder for LPG. The total under-recoveries suffered by OMCs on all four products — petrol, diesel, LPG and SKO — for the first half (April-September) of this fiscal was Rs 17,500 crore. The under-recoveries for the first half for LPG and SKO amounted to Rs 11,000 crore.

According to sources, the partial increase on two petroleum products — petrol and diesel — by Rs 3 and Rs 2 per litre, respectively, was not sufficient for checking the under-recoveries being suffered by OMCs in order to cushion the impact of spiralling international oil prices on the consumer.

The Government had raised the prices of petrol and diesel, while leaving the prices of cooking gas cylinder and kerosene untouched on September 6.

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