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| Under-recoveries on sale of petro products up sharply |
| BS Reporter / New Delhi Jun 17, 2009, 00:51 IST |
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Price hike required immediately, say executives.
 The continued rally in international oil prices has turned diesel margins red. Oil companies are losing Rs 2.96 on sale of every litre of diesel sold in the fortnight beginning June 16. Diesel accounts for 39 per cent of total petroleum product consumption in the country.
The under-recoveries on petrol, kerosene and LPG have also risen sharply, to Rs 6.08 a litre, Rs 12.65 a litre and Rs 69.49 a cylinder, respectively, said an Indian Oil executive. The government-owned oil marketing companies (OMCs) - Indian Oil, Hindustan Petroleum and Bharat Petroleum - could end the current fiscal with under-recoveries of Rs 38,700 crore if retail prices of petrol, diesel, kerosene and LPG are maintained at current levels and crude oil stabilises at around $70 a barrel.
The companies calculate the gross loss or profit on sales of auto fuels at the start of each fortnight, based on the average price of the products in the previous 15 days. The OMCs are estimated to have incurred under-recoveries of Rs 1,03,908 crore during 2008-09, which witnessed unprecedented volatility in crude prices.
From its peak of $142 a barrel in July last year, crude oil prices touched a low of $32.40 in December. However, prices have been rising since May, on improved economic sentiments and anticipation of a demand revival. The Indian basket of crude has moved up to $69.85 a barrel, as on June 15. The June average so far is $68.74, up 18.51 per cent from the May average of $58 a barrel.
“The under-recoveries would only increase in tune with the crude oil prices. A price hike is immediately required,” said an OMC official. Petroleum minister Murli Deora on Monday said the government was concerned and was exploring various options, including an increase in retail prices. When the price of petrol, diesel and LPG was earlier cut, in January, crude prices averaged $42.12 a barrel.
Meanwhile, private sector retailer Essar Oil, which has 1,250 retail outlets, has raised prices of diesel by Rs 1-2 a litre and petrol by Rs 1-2.50 a litre (except Gujarat) with effect from today. “The increase will partly cut the losses we are incurring,” said a company executive. Even with this revision, he said, the company would continue to incur a loss of Rs 1-2 a litre on both products. Reliance Industries, which sells diesel at 50 retail outlets, has not revised prices.
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