The Hindu Business Line : Oil marketing cos losing over Rs 6 per litre on petrol, diesel

Heavy load
All stakeholders have to share burden of high international crude prices.
Decision on price rise to be taken only after consensus among Finance Ministry, Left parties, Congress.

New Delhi , May 23

Even as the private sector major Reliance Industries Ltd (RIL) increased the prices of petrol and diesel by Rs 2 plus taxes, the state-owned oil marketing companies (OMCs) are still looking for a respite. The OMCs - Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corp and IBP - are losing Rs 6.51 per litre on petrol and Rs 6.66 per litre on diesel (as on May 16) for selling these products below cost.

According to sources, as on May 1, the OMCs were losing Rs 16.13 per litre on kerosene and Rs 115 per cylinder on cooking gas. While the calculation for petrol and diesel marketing margins are done on a fortnightly basis, for kerosene and LPG it is done on monthly basis, industry sources said. Collectively, the projected burden on OMCs is about Rs 73,500 crore for 2006-07.

Official sources said all stakeholders would have to share the burden of high international crude prices. Thus, to meet the under recoveries of Rs 73,500 crore, the consumer may also have to pay additional prices, along with the oil companies and the Government.

`Price rise needed'

The Petroleum Minister, Mr Murli Deora, said that some increase in prices of petrol and diesel was needed to cope with surge in crude oil prices, as the Government could not bear the full financial burden of subsidies. He, however, maintained that the Government was trying not to increase prices of kerosene and LPG.

Mr Deora has stated that any decision would be taken only after a consensus is reached on the issue among the people concerned — the Finance Ministry, Left allies and Congress. According to sources, the Finance Ministry agrees that the OMCs are facing huge losses due to high international prices and that there was an urgent need to find a solution to the problem. The Petroleum Ministry in consultation with the Finance Ministry is expected to look into the issues including aspects of price increase, subsidy on kerosene under public distribution system, contribution by the upstream oil companies, recommendations of the Rangarajan Committee, and steps to improve energy efficiency by improving the norms for fuel consumption of vehicles.

According to a senior executive of the Federation of Indian Chambers of Commerce and Industry, with the surge in the international oil prices, the domestic oil prices also need to be aligned. Some adjustment in the prices of petroleum products is necessary, otherwise the oil companies in the public sector will continue to suffer losses, the executive said.

The executive, while agreeing that the solution to the problem is inescapable, said that one also has to be aware that oil prices have an implication on the entire economy. "So, a system of burden sharing should be worked out whereby the impact of oil price increase could be cushioned. This can be achieved by slightly lowering the taxes on petroleum products," he added.