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Murali Gopalan

Mumbai, July 8 IndianOil, Hindustan Petroleum Corporation and Bharat Petroleum Corporation are likely to record combined losses of about Rs 5,000 crore on sale of diesel, petrol, cooking-gas and kerosene in the April-June quarter of this fiscal.

Despite this, the three refiners will report net profits for the first quarter thanks largely to forex and crude inventory gains.

“Crude has risen considerably since the time it touched levels of $40 a barrel some months ago. This has helped us from the viewpoint of gross refining margins,” sources said. April and May were also good months as the oil majors made profits on sale of diesel and petrol till the tide turned in June.

Of the total fuel losses of Rs 5,000 crore in the first quarter, petrol and diesel may account for approximately Rs 1,500 crore which could then be made up through the subsidy support mechanism from the Oil and Natural Gas Corporation with a little help from Oil India.

The bigger losses on cooking-gas and kerosene will be compensated by the Centre and not the upstream companies, as was the case till recently. This is in line with what Petroleum Ministry officials said at a recent press conference to announce price hikes of petrol and diesel.

In the process, this move is a huge load off ONGC (and Oil India) which would have otherwise borne one-third of the total losses or nearly Rs 1,700 crore. The Government compensation (on cooking gas and kerosene) is in the form of oil bonds unless there is a decision to transfer these subsidies to the Union Budget.

The combined projected fuel losses of IOC, HPCL and BPCL are estimated to be nearly Rs 38,000 crore for 2009-10. This has been calculated based on current crude prices of $65 per barrel.Petrol prices were raised by Rs 4 per litre and diesel by Rs 2 per litre on July 2, recently. “Even after this increase, we make losses of approximately Rs 3 a litre on petrol and Rs 2 on diesel but can stay comfortably afloat unless global crude prices start climbing to levels of over $80 a barrel,” sources added.

What has peeved the companies, though, is the attitude of the think-tank in New Delhi to freeing prices of petrol and diesel. “The formation of a committee to study these aspects is almost laughable when so many other expert panels in the past have given their recommendations already,” an oil industry executive said.

The first serious move was made in 1994 when a committee headed by Mr U. Sundararajan, then Chairman and Managing Director of BPCL, prepared a report recommending total deregulation at one go. IOC, BPCL and HPCL along with their upstream counterpart, ONGC, believe that the recent move to set up another panel is “nothing short of a farce”. “We will then follow the same routine of oil bonds and can only pray that crude does not get into a spiral, like it did last fiscal which drove us into near bankruptcy,” an executive said.

More Stories on : Petroleum | PSU | Bharat Petroleum Corporation Ltd | Hindustan Petroleum Corporation Ltd

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