The Hindu Business Line : Oil bonds may reduce heat of high crude prices

New Delhi, Feb. 20 With the international crude prices once again flirting with the $100 a barrel mark, the oil sector feels that bonds from the Government could be the major balancing factor for the State-owned oil marketing companies (OMCs) to sustain their profitability in the fourth quarter. The Indian crude basket went up by 90 cents on Tuesday at $ 93.36 a barrel up from $ 92.46 a barrel on Monday.

The Government while increasing the retail selling prices of petrol and diesel by Rs 2 and Re 1 per litre respectively on February 14 had said that bonds will now cover 57 per cent of the total under-recoveries from 42.7 per cent.

Share of burden

The Government, on its part, would bear a larger share of burden by raising the quantum of oil bonds. Of the estimated Rs 71,808 crore under-realisations for the current fiscal on sale of four petroleum products, upstream firms such as ONGC and Oil India would bear one-third (33.33 per cent). The burden on public refiners would be of 8.4 per cent of the total under-realisations. The price increase is expected to cut the losses by 1.2 per cent.

Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation are suffering a revenue loss of Rs 7.35 a litre on petrol, and Rs 9.60 per litre on diesel. The under recovery on sale of cooking gas is Rs 335 per cylinder and on kerosene Rs 19.35 a litre.

While expecting the oil bonds to come to the rescue of the oil companies in the fourth quarter of the current fiscal, analysts feel that the gains would be visible in the next fiscal if the international crude prices continue at the same level. The Indian crude basket in January averaged at $89.52 a barrel and the highest for the current fiscal stood at $94.62 on January 3. The Indian basket has averaged $90.41 a barrel so far this month.

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