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With global crude oil prices crossing the $100 per barrel mark, the losses state-owned fuel marketing companies incur on selling diesel below cost has reached a record Rs 9.23 per litre.
Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) sell diesel, domestic LPG and kerosene below cost, as the prices are controlled by the Government.
“The three retailers, who calculate the desired retail price on 1st and 16th of every month based on the average international price in the previous fortnight, were losing Rs 6.80 per litre on diesel till last week. But this month, the losses have climbed to Rs 9.23 a litre,” an industry official said.
World oil prices stayed above $100 a barrel in the Asian trade today on fears the escalating turmoil in Egypt will disrupt supply flows through the strategic Suez Canal.
Based on the average price of imported crude in the second fortnight of January, the three firms are losing Rs 345 crore in revenue every day on selling diesel, domestic LPG and kerosene below cost.
“For the full fiscal, the three are projected to lose Rs 75,507 crore in revenues at current prices,” the official said.
Besides diesel, IOC, BPCL and HPCL are losing Rs 21.60 per litre of kerosene and Rs 356.07 per 14.2 kg LPG cylinder.
In addition, they suffer a loss of about Rs 2.50 per litre on petrol sales, even though the prices were freed from Government control in June last year.
If the prices are not hiked, the Government will have to come up with other ways to compensate the oil marketing companies for their losses.
The Oil Ministry wants the Finance Ministry to compensate the oil companies in cash for at least half of their under-recoveries by making adequate provisions in the Budget. Upstream oil firms like Oil and Natural Gas Corporation will shoulder one-third of the burden.
For the first nine months, the Finance Ministry has approved the release of a cash compensation of Rs 21,000 crore to the three state-run fuel retailers.
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