The Hindu Business Line : Oil marketing cos again seek Govt help on discounts

Losing out
OMCs like Indian Oil Corporation Ltd, one of the dominant players in the retail market, would be losing more on sales of kerosene, petrol and diesel from April 1 due to rise in international prices.

New Delhi , April 4

With Reliance Industries Ltd (RIL) declining to continue with discounts to the state-owned oil retailers in the new fiscal, the oil marketing companies (OMCs), reeling under pressure for selling petroleum products below the cost price, have again pressed the Ministry for Petroleum and Natural Gas to prevail over RIL to continue extending discounts to them.

According to sources, the OMCs have written to the Ministry stating that the ground reality has not changed much, with the companies continuing to feel a pinch on their bottomlines. RIL has recently written to the OMCs that it will not be in a position to offer them any discounts on the products sold by it to the retailers.

Sources told Business Line that OMCs like Indian Oil Corporation Ltd, one of the dominant players in the retail market, would be losing more on sales of kerosene, petrol and diesel from April 1 due to rise in international prices. The company is losing Rs 3.20 per litre on petrol, up from Rs 2.40 per litre in March and Rs 5.20 against Rs 4.40 per litre on diesel. It is selling kerosene at a loss of Rs 13.60 per litre against Rs 13.10 in March, the sources added.

Loss on LPG down

However, the loss on cooking gas (LPG) has come down to Rs 192 per cylinder from Rs 243 per cylinder earlier.

The net under-realisation suffered by the company for 2005-06 stood at over Rs 4,000 crore. Indian Oil has suffered a revenue loss of Rs 1,700 crore on sale of four petroleum products — petrol, diesel, LPG and kerosene — in March alone, as the domestic fuel prices have not been changed in line with global prices.

RIL discounts

During 2005-06, RIL offered discounts to the tune of Rs 750 crore on sale of LPG and kerosene. Under the subsidy mechanism followed currently, the loss incurred by the OMCs - IOC, Hindustan Petroleum, Bharat Petroleum and IBP - on the four petroleum products' sale are shared equally by the upstream companies, stand-alone refiners like RIL, Kochi Refinery, MRPL and Chennai Refinery, and the retailing companies.

The stand-alone refiners bear the subsidy burden in the form of discounts extended to the OMCs. As the market dynamics has not changed with the retailing companies expecting that the losses are likely to remain at the same level in 2006-07.

On its part, RIL had been seeking a level-playing field. In fact, it had asked the Government to extend compensation similar to that extended to PSU retailers for selling petrol and diesel at below cost prices.