Underrecovery relief likely for Centre

The overall underrecovery for oil marketing companies (OMCs) in the current financial year was set to touch Rs 140,000 crore, Indian Oil Corporation Chairman R S Butola said on Thursday.

The underrecovery, the gap between the controlled retail price and what the three government-owned OMCs get on certain petroleum products, was Rs 161,029 crore in 2012-13. The three OMCs are Indian Oil, Bharat Petroleum and Hindustan Petroleum.

The rupee’s fall and the rise in international crude oil prices had given rise to fear in early September that underrecovery could touch Rs 200,000 crore this year. Out of this, the government’s share is set to be around Rs 80,000 crore, while upstream OMCs’ share may be close to last year’s Rs 60,000 crore. Early this year, the finance ministry had made it clear that there would be no relief for upstream majors like ONGC and OilIndia this year as far as underrecovery was concerned. On the other hand, GAIL may be relieved of the under-recovery burden from next financial year.  

While the price of the Indian basket of crude oil zoomed to Rs 114 a barrel at one point, the rupee had fallen to 69 a dollar.

As the government had made provision for only Rs 65,000 crore as petroleum subsidy this year, of which Rs 45,000 crore was given as arrears for last year, there was fear of a ballooning subsidy bill.

“Even now, there is no complete relief on underrecovery. We are expecting the overall underrecovery for OMCs to touch Rs 140,000 crore this financial year,” Butola told Business Standard. Not ruling out another rise in petrol prices, he said, “International prices are still increasing. Hence, we are reviewing the issue.”

Petrol prices were revised on October 1, when it was cut by Rs 3.05 a litre, excluding local taxes.

According to the petroleum ministry, every dollar’s increase in crude oil prices would add Rs 4,000 crore and every rupee fall against the dollar would raise overall under-recovery by Rs 8,000 crore.

At the beginning of this financial year, the finance ministry had pegged the underrecovery figure at as low as Rs 80,000 crore, when the exchange rate was around Rs 54 a dollar and crude oil prices were about $99 a barrel.

The underrecovery on diesel (HSD) for the second fortnight of October fell to Rs 10.24 a litre, against Rs 10.51 a litre during the first fortnight.

In the case of kerosene and domestic LPG (cooking gas), underrecoveries for October remained at Rs 38.32 a litre and Rs 532.86 a cylinder, respectively.

OMCs are incurring a combined daily underrecovery of about Rs 442 crore on the sale of diesel, kerosene and domestic LPG from October 16.

This is higher than the Rs 432 crore for the previous fortnight. The OMCs have reported a total of Rs 25,579 crore as underrecoveries during the first quarter of 2013-14.

The international crude oil price of the Indian basket, as published on Thursday by the Petroleum Planning and Analysis Cell of the petroleum ministry, came down to $108.14 a barrel on Wednesday from $108.71 a barrel the previous trading day. The exchange rate on Wednesday was Rs 61.69 a dollar.