The retail price of diesel, PDS kerosene and domestic LPG is still below the required market price and not in line with international oil prices. This was stated by the Minister of Petroleum and Natural Gas, Mr S. Jaipal Reddy, in the Rajya Sabha on Tuesday.
As a result, the public sector oil marketing companies (OMCs) are incurring under-recovery of Rs 6.06 a litre on diesel, Rs 23.74 a litre on the sale of PDS Kerosene and Rs 247.00 for every cylinder of domestic LPG based on the refinery gate price effective August 1, he said.
The continued incurrence of under-recoveries is adversely affecting the OMCs —Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation — financial and liquidity position. The rising under-recoveries have worsened the cash flows of these companies compelling them to borrow heavily, to meet their working capital and project–funding requirements, the Minister said. The borrowings of OMCs have increased from Rs 67,332 crore in March 2008 to Rs 1,23,183 crore in June 2011.
Mr Reddy also said that the OMCs have been able to report profits only as a result of sharing of a major portion of their under-recoveries by the Government and the public sector upstream oil companies. Had the under-recoveries not been compensated to OMCs, they would have reported huge losses as indicated in the table.