With the international crude oil prices hovering around $110 per barrel and the subsidy bill threatening to balloon, touching around Rs. 1,40,000 crore this fiscal, the oil marketing companies (OMCs) have been denied the “political go ahead’’ for raising of prices of petrol, diesel and domestic LPG.
At present, OMCs are incurring around Rs. 6 crore per day loss on sale of petrol which is a decontrolled product. Losses on sale of diesel at controlled rates have touched Rs. 14.57 a litre. “Notwithstanding the fact that petrol prices were decontrolled in June 2010, the movement in prices continues to be subjected to “political decision’’ by the higher authorities. Due to Assembly elections in five States, there is no likelihood of prices being raised despite losses mounting and OMCs scrambling for cover,’’ a senior Petroleum Ministry official said here.
It is learnt that the OMCs had carried out a review of the petrol prices last fortnight and had proposed a hike of Rs.1.50 to Rs. 2 per litre hike to match the movement of crude oil prices in the international market. However, it is learnt that the political leadership of the day conveyed to the OMCs that they should not push for any hike in prices of petroleum products including LPG in view of the Assembly polls. “The earlier projections of Rs. 1.31,000 crore under recoveries has not been revised to around Rs. 1,40,000 crore and could even go further up if crude oil prices continue to maintain the upward swing. It is going to be a very difficult year as the Finance Ministry is yet to work out a formula for compensation,’’ the official remarked.
Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL) are losing Rs. 435 crore per day as they are made to sell diesel, domestic LPG and kerosene way below cost to keep inflation under check. Diesel is being sold at a loss of Rs. 14.57 a litre, kerosene at Rs. 29.93 per litre and domestic LPG at Rs. 326 per 14.2-kg cylinder. Losses on diesel are the highest ever, beating Rs. 13.53 a litre loss that oil firms incurred in the first half of December.
For its part, the Petroleum Ministry wants the Finance Ministry to compensate the oil companies in cash for at least half of their under-recoveries by making adequate provisions in the Budget. Upstream oil firms like Oil India Limited and Natural Gas Corporation (ONGC) will shoulder one-third of the burden. For the first six months, the Finance Ministry has approved the release of a cash compensation of Rs. 30,000 crore for the three state-run fuel retailers.