LPG, diesel burn OMC pocket

Richa Mishra New Delhi | Updated on January 03, 2011 Published on January 03, 2011

With LPG consumption expected to show an increase of 10 per cent in December, the OMCs feel that they will be able to break even on cooking gas only if the retail price is doubled.

It is not only diesel but domestic LPG (cooking gas) that is also becoming a source of concern for the public sector oil marketing companies (OMCs). With LPG consumption expected to increase by 10 per cent in December, the OMCs feel that they will be able to breakeven on the cooking gas front only if the retail price of the gas is doubled.

The public sector oil companies – Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation – sell domestic LPG, PDS kerosene and diesel and a Government controlled price. Effective January 1, the desired increase in the retail selling price of domestic LPG, as assessed by the oil companies is Rs 366.28 for every 14.2 kg cylinder.

Currently, domestic LPG price ranges from Rs 345.35/cylinder at Delhi and Rs 365.10/cylinder at Kolkata. However, political compulsions would restrict the Government from allowing such a steep increase in domestic LPG prices.

“A situation has come where just a marginal increase of Rs 20 or Rs 50 per cylinder will not help. As the domestic price, which is artificially controlled is not moving in tandem with the international product price, the Government needs to take a decision,” an oil company official said.

In November 2010 LPG consumption saw a growth of 8.9 per cent year-on-year at 1.197 million tonne. “This increase in consumption has been mainly in domestic LPG category due to subsidised rates. In fact, the subsidised rates have also led to diversion of domestic LPG for use in commercial places like dhaba’s,” the official said.

Diesel is also experiencing constant increase in demand, though growth in diesel sales, which makes for a third of the refined products consumption, eased in November to an annual 3.8 per cent. For December the industry is expecting a growth of about 3-5 per cent.

The desired increase in the retail selling price of diesel is Rs 6.99 a litre. At present, diesel is being sold at Rs 37.75 a litre in Delhi and Rs 42.06 a litre in Mumbai.

Private retailers like Essar and Reliance are also feeling the burden as they have to sell the fuel at a lower price in order to compete with the public sector OMCs. At present, the private players are selling diesel at about Re 1-Rs 4 a litre (varying from state to state) higher than PSUs.

At the current crude price levels, the PSU OMCs are estimated to lose Rs 72,812 crore on sale of petroleum products below the market price in the current fiscal.

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Published on January 03, 2011
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