Indian largest public sector oil marketing company, Indian Oil Corporation (IOC), may incur under-recoveries of Rs 5,000 crore from the subsidised sale of domestic LPG and PDS kerosene in the third quarter of the current financial year 2009-10. The company reported accumulated under-recoveries of Rs 7,135 crore from the first and second quarter, for which the government is yet to reimburse the company through oil bonds.
However, the company is still able to borrow at the normal rate of 5-5.5% and does not think that the situation is alarming as yet.
?The situation is bad but not alarming,? IOC?s director (finance) SV Narasimhan told FE. The company meets its under-recoveries on the sale of petrol and diesel with price discounts on crude oil purchased from upstream oil companies like ONGC and Indian Oil Ltd (IOC).
However, price under-realisation on sale of domestic LPG and PDS is made up by the government through oil bonds. IOC reported under-recoveries of Rs 7,135 crore from the retail sale of these two products during the first half of the financial year.
However, it has not yet received any bonds from the government on that account. As of June end, the company?s borrowing stood at Rs. 35,000-36,000 crore. But it has now increased to Rs. 47,000 crore.