IBP, which reported a net loss of Rs 233.97 crore in April-June quarter of 2005-06 fiscal, is projecting a further loss of Rs 495 crore in the second quarter due to the freeze on fuel price despite cost jumping by 26 per cent since last revision.

"The company's accumulated net worth will be eroded completely at the end of September 2005 and hence, the company will become sick," IBP Managing Director N G Kannan last week wrote to Petroleum Secretary s C Tripathi.

Petrol is currently being sold at Rs 7.42 a litre below the cost of import, while diesel is underpriced by Rs 5.86 per litre. Public sector oil firms are incurring a loss of Rs 11.21 a litre on sale of kerosene and over Rs 100 on sale of every lpg cylinder.

"Being a marketing company, IBP has been compelled to sell the products below cost due to non revision of the retail selling price in parity with the movement of produce cost every fortnight," he said.

IBP had to face a cash outgo of Rs 563 crore in 2004-05 for financing under-recovery on petrol, diesel, lpg and kerosene. "It has further suffered cash outgo amounting to Rs 728 crore during April-August 2005 on account of loss."

Other oil retailers Bharat Petroleum Corp Ltd, Hindustan Petroleum Corp and Indian Oil Corp too would become sick in 13 months, 20 months and 35 months respectively if fuel prices were not raised.

"The aggregate cash outgo of Rs 1,291 crore has created a serious strain on IBP's liquidity position. The company's future investment plan has got a major set back besides resorting to borrowings for working capital and financing under recovery with significant interest cost," Kannan wrote.

He pleaded that the company's bottomline be protected so as to enable it to generate enough internal resources to meet the investment plans and to protest shareholders interests.

"Therefore, we solicit your kind assistance to treat IBP's issue independently as IBP does not have any refinery margin like other marketing companies," he added.