Rising crude prices: OMCs lose Rs 78,000 cr

The price of the Indian basket of crude averaged $85.09 per barrel in 2010-11, up 22 per cent from the $69.8 per barrel in 2009-10. This resulted in an estimated gross loss of Rs 78,000 crore for the public sector oil marketing companies (OMCs) — Indian Oil, Bharat Petroleum and Hindustan Petroleum in the previous financial year.

The rally in crude oil continues as price has been hovering well above $110 per barrel for the last few weeks, signalling an even higher loss in the new financial year.

The government-owned companies sell diesel, domestic LPG and kerosene at government-controlled prices and, therefore, incur under-recovery or revenue loss on sale of these products. The under-recovery or the revenue public sector OMCs lose on selling diesel, on Monday stands at Rs 16.76 per litre.

The OMCs are also losing Rs 28.33 per litre on kerosene sales and Rs 315.86 for every 14.2-kg LPG cylinder. The petrol price has been decontrolled with effect from June 26, 2010. Still, the companies incurred a loss of nearly Rs 4.50 per litre as they have not been able to pass on the entire price rise.

The petroleum ministry has sought 50 per cent of the total revenue loss as compensation from the finance ministry. At the estimated level of Rs 78,000 crore revenue loss to OMCs, the ministry may have to provide around Rs 38,000 crore. So far, it has provided Rs 20,911 crore. One-third of the gross under-recoveries will be shared by the upstream companies — ONGC, GAIL and OIL — while the rest is likely to be absorbed by the OMCs.