EGoM meet on fuel price deferred; OMCs' losses to rise

The meeting of the Empowered Group of Ministers (EGoM) on fuel pricing that was scheduled for December 22 has been deferred. The loss on diesel for oil marketing companies (OMCs) has reached Rs 6 per litre.

The panel headed by Finance Minister Pranab Mukherjee was expected to review diesel prices to help bring down the losses of OMCs — Indian Oil, Bharat Petroleum and Hindustan Petroleum. “We have received no communication from the finance minister’s office about the meeting on December 22. It stands deferred,” said a petroleum ministry official.

“The underrecovery, or the revenue oil marketing companies lose on selling diesel, today stands at Rs 6.08 per litre,” the official said. The OMCs are losing about Rs 105 crore every day in revenues for selling diesel below the imported cost.

The oil companies are also losing Rs 17.72 per litre on kerosene sales and Rs 272.19 for every 14.2-kg LPG cylinder. Last week’s raise of Rs 2.95-2.96 a litre on petrol is lower than the desired increase of Rs 4.20, resulting in a loss of Rs 1.25 on per litre of petrol for OMCs.

The three firms are projected to end the financial year with a Rs 68,361 crore revenue loss. “They are losing Rs 215 crore per day on the sale of the three products. Also there are marginal under-recoveries on petrol,” the official said.

The OMCs, which purchase crude oil at market rates, are required to sell diesel, kerosene and LPG at government-subsidised prices, resulting in losses. These losses are usually compensated by the government through a mix of cash and discounts from upstream companies like Natural Gas Corporation and Oil India Ltd.

The Indian basket of crude oil has averaged around $88.94 per barrel in December, up 5.55 per cent from the November average of $84.26 when the last increase of Rs 0.32 in petrol was announced. The current financial year’s average price is $78.82 per barrel, up by nearly 13 per cent from the 2008-09 average of $69.76.