The Hindu Business Line : Indian crude basket drops to $45.50/barrel

New Delhi, Nov. 21 Will the plunging global crude prices result in lowering of domestic fuel prices is the question attracting maximum attention now. The Indian crude basket hit a fresh low at $45.50 a barrel on Thursday after touching a high of $142.04 a barrel on July 3.

However, for the public sector oil marketing companies (OMCs) it is not enough to repair the past losses incurred by them for selling petroleum products below the cost price. The Indian crude oil basket has averaged $52.78 a barrel so far this month, down over 23 per cent from October’s average of $69.12.

The OMCs are still saddled with crude procured in September-October when the Indian basket has averaged about $70-$100 a barrel, industry officials told Business Line. For July-September, the basket has averaged $114.41 a barrel. Current profit on sale of petrol and diesel will not be enough to wipe out the net losses the three OMCs have reported in the second quarter of the current fiscal.

The State elections and the continued under recoveries being suffered by the OMCs on sale of cooking gas and kerosene sold under public distribution system (PDS) are some of the factors being cited by the Government for not considering an immediate cut in retail prices of petroleum products.

Besides, currency valuation and inventory losses are also an important component before any decision is taken on this front, industry sources said.

While the basket average of $50 a barrel augurs well for the OMCs, crude was still averaging at $104.84 a barrel for the current fiscal year. The OMCs are looking for the Government to revisit the current burden sharing mechanism to repair the past losses, industry sources said.

For the first time in three years, the PSU OMCs — Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd — are making profit on petrol and diesel, they still continue to incur heavy losses on sale of cooking gas and kerosene at controlled price.

The Petroleum Ministry has been maintaining that it is not looking at cutting prices currently. The Petroleum Secretary, Mr R.S. Pandey, had said that “in my view, price reduction is not possible when there are such huge losses on cooking fuels”.

The OMCs are making a profit of Re 0.70 a litre on diesel sales, and Rs 9.86 a litre on petrol. However, they continue to lose Rs 22.40 a litre on kerosene and Rs 343.49 a cylinder on LPG.

The dip in crude oil prices will result in bringing down the total under recoveries for the current fiscal to Rs 1,22,710 crore from the earlier estimates of over Rs 2,00,000 crore and the prospects for the current quarter of this fiscal also look good for the OMCs, industry sources said.