IOC to review capex plan if fuel prices not revised

Kolkata, Dec 28 | Updated: Dec 29 2007, 05:15am hrs
Public sector Indian Oil Corporation (IOC) on Friday said it may have to review its capital expenditure plan if fuel prices are not revised quickly.

"IOC is incurring a loss of Rs 148 crore per day due to under-recoveries in prices of petrol, diesel, LPG and kerosene. If prices are not revised, the capital expenditure plan may get affected and we have to review it," IOC chairman and managing director Sarthak Behuria said after the company's first board meeting.

He said that as per IOC estimates, the under-recovery in petrol is Rs 8.19 per litre, diesel Rs 9.24 per litre, LPG Rs 262.37 per cylinder and kerosene Rs 21.21 per litre. Out of the

Rs 148 crore loss per day, the contribution of IBP that has been merged with IOC is Rs 14 crore.

Asked how long the company would be able to sustain such under-recovery, Behuria said, "We can't sustain for long". To a question what the IOC had sought from the government to overcome the problem, he said the matter had already been referred to the group of ministers (GoM) and the solution could be a combination of price rise, duty cuts and subsidies.

The GoM, headed by external affairs minister Pranab Mukherjee, is likely to meet next month to review fuel prices."We hope that the government will take a call soon," Behuria said.

Asked whether IOC would slip into the red due to under-recoveries, he said there are many profit-making areas like lubricants, refining margin, pipelines, ATF, bitumen, naptha and foreign operations.

He said as per the current capital expenditure plan of IOC, the company intended to spend Rs 8,000 crore for a new refinery, petrochemicals, pipelines and business development. Regarding exploration and production, a separate budget had been kept aside, the IOC CMD said. On the IOC's merger with IBP, he said it had been seamlessly completed. Asked about IBP's cryogenic and explosive divisions, he said a final decision would be taken next fiscal on what to do with the two units.

Behuria said that post merger IBP is contributing 10% of IOC's marketing business. IOC also intended to retain the IBP brand name, he said. Meanwhile, IOC was going ahead with the proposed merger with BRPL, he said.

On the Paradeep project, he said work had already started and the construction was on. On the outlook of the future crude oil prices, an IOC official said it was going to stabilise at around US$ 70 per barrel in the next 3-4 months.