Falling crude prices shrink losses for OMCs, treasury

Following a slide in crude oil prices, the under-recoveries of oil marketing companies (OMCs) - Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation - on subsidised sale of petrol and diesel have come down sharply in the current fortnight.

The under-recovery on petrol and diesel has come down from Rs 2 and Rs 1.62 a litre to Rs 1.17 and Rs 0.06, respectively. That on kerosene oil and LPG cylinders remains unchanged at Rs 16 a litre and Rs 96.52 a cylinder. At current prices of crude oil and petroleum products and the rupee-dollar exchange rate, the under-recoveries for the current fiscal are estimated at Rs 26,984 crore as against Rs 30,000 crore projected earlier this month.

The Indian basket of imported crude has averaged $63.42 a barrel in the month so far, down 8.25 per cent from the June average of $69.12. However, the July average is still higher than the current year’s average, till date, of $60 a barrel, while being significantly lower than the previous fiscal’s average of $83.57 a barrel. 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 nearly doubled since then, on recovery signals from leading economies like China and India.

On July 2, the government hiked prices of petrol and diesel by Rs 4 and Rs 2 a litre, respectively. Even after the hike, the OMCs were estimated to lose Rs 30,000 crore on subsidised sale of products.

The OMCs are estimated to have closed the financial year 2008-09 with under-recoveries of Rs 103,908 crore on subsidised sale of petrol, diesel, kerosene and LPG cylinders. They have been compensated by government bonds and discounts from upstream oil companies.