The Hindu Business Line : Oil cos make profit on petrol sales

With the softening of international crude prices, oil marketing companies (OMCs) have started making marginal profit of Rs 1.50 per litre in retail sale of petrol and almost breaking even on diesel sales.

However, the consumer may have to wait before any price revision is considered, as the Government wants to watch the trend, since the companies continue to bleed on sale of subsidised kerosene and cooking gas.

The Government sets the price of oil products sold by state-run oil firms. The Indian crude basket stood at $57.02 a barrel on October 3. The basket, which averaged $70.84 per barrel in August, had dipped to $61.04 a barrel by September. For the first three days of this month, it averaged at $58.19 a barrel.

Making the Government stand clear on the pricing issue, the Finance Minister, Mr P. Chidambaram, said on Wednesday that the softening of crude oil prices did not imply that domestic prices of oil products would correspondingly get lowered. "When international prices went up, the entire burden was not passed on to the consumers," he said, while talking to newspersons on the sidelines of a function here.

The Finance Minister, however, pointed out that the softening of global crude oil prices spelt good news for the Government and the upstream oil companies as their subsidy burden would come down. He said that the subsidy paid by the Government and firms such as ONGC and other oil companies would be less and to that extent these companies could use them for reinvestments.

Asked about the status of the oil bonds, Mr Chidambaram indicated that these would soon be issued. "I thought they were ready and would have been issued," he said. The Government has already obtained Parliamentary approval for issuing oil bonds worth Rs 14,150 crore to oil marketing companies to offset the loss incurred by them during fiscal 2006-07 for selling oil products below market prices.

The Government had last raised prices of petrol and diesel by Rs 3 and Rs 2 a litre, respectively, in early June when the Indian crude basket had averaged $66.80 a barrel in that month. Subsequently, the basket shot up further and averaged $71.36 a barrel in July, but domestic retail prices were not raised. In the last 30 days, the basket has fluctuated between $70.12 a barrel and $56.28 a barrel. The Brent today saw an intra-day low of $57.78 a barrel.

With this softening trend, both Indian Oil Corporation (IOC) and Bharat Petroleum Corp said that they were making Rs 1.50 per litre profit on petrol sales.

"The margin on petrol is a positive Rs 1.50 per litre but on diesel it is marginally negative at 13 paise per litre," the IOC Chairman, Mr Sarthak Behuria, told media persons here. IOC was losing Rs 16 a litre on kerosene and about Rs 170 per 14.2-kg cylinder on cooking gas, he said.