Despite raising petrol price, retailers losing Rs 50 cr a day

Despite raising petrol prices by around Rs 2.95 a litre — the second-biggest increase in this calendar year so far — public and private retailers are losing Rs 50 crore a day on selling the auto fuel.

Bharat Petroleum Corporation Ltd (BPCL), a public sector oil marketing company (OMC), increased petrol price by Rs 2.95 with effect from Tuesday midnight. Indian Oil Corporation (IOC), the biggest OMC, will raise the price by Rs 2.96 a litre, from Wednesday midnight. Hindustan Petroleum, the third public sector oil marketer, is also likely to follow suit in a day or two.

Private sector OMCs such as Essar Oil said it had already made a similar increase.

Though this is the sixth increase in this financial year so far, the quantum is below the desired level of Rs 4.17 a litre, which means these companies continue to lose around Rs 1.20 on every litre of petrol.

“Based on the sale of 1.28 million kilolitres of petrol every month, the industry could incur a monthly loss of Rs 1,500 crore if crude oil prices stablise at these levels and more price increase is not taken,” said an industry official.

A BPCL official said with a further fluctuation in crude oil, a decision to make more price adjustments would be taken.

Petrol pricing was decontrolled with effect from June 25 in accordance with a suggestion made by a committee headed by former Planning Commission member Kirit Parikh.

The public sector OMCs have accumulated losses worth Rs 2,227 crore on petrol in the period up to June 25.

However, the industry has not passed the entire loss of Rs 4.17. The Indian basket of crude oil has averaged around $88.60 per barrel in December, up by over 5 per cent from the November average of $84.26 when the last hike of 32 paise in petrol came. The current fiscal average price is $78.62 per barrel, up by a sharp 12.70 per cent from the 2008-09 average of $69.76.

The loss on petrol will add to the already existing loss on sale of diesel, kerosene and domestic LPG. Currently, OMCs are incurring underrecovery (revenue loss) of Rs 5.40 on every litre on diesel, Rs 17.72 a litre on kerosene and Rs 272 per LPG cylinder.