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The Minister for Petroleum & Natural Gas, Mr S. Jaipal Reddy, is a worried man. The rising global crude oil price and weakening of the Indian rupee versus the dollar is not only hurting consumers but also the financial health of the public sector oil marketing companies.
At the Economic Editors' Conference here on Wednesday, the Minister said, “We need to adopt a policy. My Ministry has proposed to the Finance Ministry to impose duty on diesel-run passenger vehicles…15 per cent of the total diesel consumption is by such vehicles.”
As a result of selling petroleum products — diesel and cooking fuel (domestic LPG and kerosene sold under the public distribution system) — at a Government-controlled price, the oil retailers have been incurring huge revenue loss. The estimated annualised loss on diesel alone is Rs 67,000 crore, he said.
Mr Reddy said “the current crude prices are an unpleasant reality that cannot be wished away.”
The Petroleum Ministry has sought a higher level of financial assistance for the public sector retailers from the Finance Ministry. For the first quarter of the current fiscal, the Petroleum Ministry has sought Rs 15,000 crore to compensate the oil retailers for the revenue loss incurred.
For fiscal 2011-12, the retailers are projected to lose Rs 1,21,571 crore at an average price of the Indian basket of crude oil at $110 a barrel during the year. Upstream companies — ONGC, Oil India, and GAIL — will continue to share the burden of under-recoveries of oil retailers for selling petroleum products at a controlled price.
The companies are at present free to take suitable decisions on pricing of petrol on the basis of international oil prices, market conditions and commercial considerations. The price of petrol and crude oil has declined marginally in the recent past in international markets.
“However, the rupee has been simultaneously depreciating against the dollar since September 2011. Hence the decline in prices of petrol and crude oil in the international market is offset,” he said.
As regards capping the number of LPG cylinders that the domestic consumer can buy at the subsidised price, beyond which the consumer will have to buy at market rates, the Minister said, “no final decision has been taken.”
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