The Hindu Business Line : Govt feels pressure as crude nears $100

New Delhi, Nov. 7 Pressure is mounting on the Government to take a decision on whether to pass on the burden to the consumer to lessen the impact of volatile crude prices on the State-owned oil marketing companies (OMCs). With global crude prices inching towards $100 a barrel and the Indian crude basket close to $90 a barrel, options to protect the OMCs are narrowing down for the Government.

Speaking to presspersons, the Petroleum Minister, Mr Murli Deora, said: “We are trying to see if we can find a solution next week. There are three options — fuel price hike, duty cuts, and issue of more bonds to oil companies. It will take some time.”

Under-recoveries

The Indian crude basket on Tuesday touched an all-time high of $89.36 a barrel, up 55 per cent during the calendar year. The under recoveries being suffered by the OMCs due to selling LPG, kerosene, petrol and diesel below the cost price are estimated to increase to Rs 70,500 crore for the full fiscal, from the earlier estimate of Rs 54,935 crore if the crude prices remain at current levels.

Indications are that the Government could compensate them with oil bonds worth Rs 30,000 crore.

The Cabinet had earlier approved sharing 42.7 per cent of the total revenue loss incurred by the OMCs through bonds. It had approved issuing bonds worth Rs 23,458 crore in the current year, taking into account the Indian crude oil basket price of $70 a barrel.

In addition, upstream companies like ONGC will share 35 per cent of the under-recovery.

Loss slab

The Indian Oil Corporation Chairman, Mr Sarthak Behuria, said his company is losing Rs 121 crore a day and it would have to increase its borrowings to Rs 3,000 crore a month if prices were not immediately raised. IOC’s current borrowings stand at Rs 28,000 crore.

The OMCs — IOC, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation — together were losing over Rs 240 crore per day on sale of petrol, diesel, domestic LPG and PDS kerosene. They make a loss of Rs 4.94 on sale of every litre of petrol, Rs 6.50 per litre on diesel, Rs 16.42 a litre on kerosene, and Rs 207 per cylinder on LPG.

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