The Hindu Business Line : Oil cos losing over Rs 700 cr a day on fuel sales

New Delhi, July 1 With the global crude prices rallying above $140 a barrel mark, the public sector oil marketing companies (OMCs) are feeling the pressure on their profitability.

The combined revenue loss of the three OMCs – Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation – was estimated to be close to Rs 700 crore a day at the current crude prices on selling auto and cooking fuel below the cost price.

Four products

The revenue loss on four products – petrol, diesel, kerosene and cooking gas – is because OMCs sell them below the cost price. The Government decides the price of the four products to control inflation. Oil company officials told Business Line that the uncertainty and unpredictable situation is adversely affecting the performance of the companies.

“The companies are, on their own, taking initiatives such as deferring non-essential capital expenditure programmes and also cost control measures, but these are peanuts and do not contribute much to improving the situation. A bail-out package with more revenue earning options is required.”

As on July 1, the companies were losing Rs 14.90 a litre on petrol sale, Rs 24.90 a litre on diesel, Rs 38.10 a litre on kerosene, and Rs 338.50 a cylinder on liquefied petroleum gas (cooking gas).

The country’s crude oil basket on Monday touched a fresh high of $137.49 a barrel. The Indian basket has averaged $129.72 a barrel this month.

Build-up of inventory by dealers in anticipation of price increase had a major impact on sales of petrol and diesel in May. While diesel sales saw an increase of 16.6 per cent at 4.80 million tonnes, sale of petrol rose by 15.1 per cent to 1.05 million tonnes. The retail selling prices of petrol and diesel were increased in June.

The domestic oil product sales in May saw an increase of 4.1 per cent from a year ago at 11.67 million tonnes.

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