The Executive Director of Finance, Bharat Petroleum Corporation Ltd, Mr S.K. Joshi, feels that the likely fuel price hike of Rs 2/litre is inadequate. He says that the under-recoveries for petrol stand at Rs 6-7 per litre.

Mr Joshi further adds that the company is seeing a loss of Rs 40 crore per day. He says that the company's balance sheet is affected and there is a need for stable policies.

Mr Joshi says that the company has not heard from the government on oil bonds for FY 07.

Excerpts from CNBC - TV18's exclusive interview with Mr Joshi

If the price hike is about Rs 2 per litre on petrol and diesel, how much would it go towards alleviating the pain you are going through and what would still be the under-recovery?

If one looks at diesel and petrol, the current under-recovery for the oil company is almost about Rs 6-7. So, this price hike of Rs 2 is less than one third. It will not sort out the current under-recovery issue.

Are you happy with the way the government is going about it with smaller price hikes and issue of oil bonds? Can this be an ideal situation for oil companies?

There are two large concerns because this ad hoc approach is not really telling us the long-term road map. Sometime back, we had the hope of the Rangarajan Committee report getting further attention. But we have not heard of a long-term road map. That brings a lot of uncertainty and then investors don't like it.

Till now, the oil marketing companies had some kind of comfort because of their strong balance sheet. Now it has reached a point where, if sufficient relief is not given on a stable basis, it has started affecting long-term investment plans. That is a serious concern going forward for the country's energy security.

What are the current revenue losses per day? If you work with this run rate, how will you end this year with in terms of losses?

It is quite high. BPCL alone is suffering a negative cash flow on a daily basis, about Rs 40 crore whereas for oil marketing companies, it is about Rs 160 crore. We can't survive with this kind of negative outflow.

Do you expect to see anything on kerosene and LPG in terms of a price hike?

I don't want to guess anything. Let us wait and see what they are going to do. The government is aware of the seriousness of this situation. So, I hope they would come out with some good relief plan.

Have you heard anything from the government, in terms of another set of oil bonds being issued for FY 07?

No, not yet.

(This article was published in the Business Line print edition dated May 30, 2006)
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