IOC losing Rs 79 cr per day on selling fuel below cost

State-run Indian Oil Corporation (IOC), the nation's largest fuel retailer, is losing about Rs 79 crore per day on selling auto and cooking fuel below cost.

"International oil prices have softened a bit, resulting in a marginal reduction in our under-recoveries on petrol, diesel, domestic LPG and kerosene," an IOC official said.

IOC and sister PSUs - HPCL and BPCL, who have been barred by the government from revising fuel prices to keep inflation under check, calculate the desired selling price for petrol and diesel on 1st and 16th of every month based on the previous fortnight's average global oil price.

The three firms currently lose Rs 3.63 per litre on petrol and Rs 2.33 a litre on diesel. These are lower than Rs 4.69 per litre loss on petrol and Rs 3.09 a litre on diesel they suffered in the first fortnight of September.

"IOC lost Rs 90 crore per day on fuel sales in the first fortnight of September. This has come down to Rs 79 crore a day from today," the official said.

On domestic LPG and kerosene, the desired price of which is calculated on a monthly basis, the three firms make a loss of Rs 158.55 per 14.2-kg LPG cylinder and Rs 17.15 on every litre of kerosene sold.

"At current oil prices, IOC will end the fiscal with a revenue loss of Rs 23,510 crore and the industry (IOC plus BPCL and HPCL) will see a revenue loss of Rs 41,440 crore," he said.

The basket of crude oil India buys from overseas markets averaged USD 68.07 per barrel in September as against the August average of USD 71.98 a barrel.

Petroleum Secretary R S Pandey had last week stated that the government will compensate under-recovery or revenue loss on sale of domestic LPG and kerosene through issue of oil bonds.

At current prices, the revenue loss on kerosene would be Rs 17,000 crore while that on LPG would be another Rs 12,000 to Rs 13,000 crore. These will be met through issue of bonds.

The Rs 10,000 to 11,000 crore under-recovery on petrol and diesel would be partly met by upstream firms like ONGC by way of discounts on crude oil and LPG they sell to the three retailers.

"Oil marketing companies (IOC, BPCL and HPCL) may have to bear a part of the under-recovery on auto fuels," Pandey had stated.

Of the Rs 103,292 crore revenue loss on fuel sales in 2008-09 fiscal, 68 per cent was met by the government through issue of oil bonds. Upstream firms ONGC bore Rs 28,225 crore, GAIL India Rs 1,781.2 crore and Oil India Ltd Rs 2,936.7 crore.