The public sector oil marketing firms?Indian Oil, Bharat Petroleum and Hindustan Petroleum are on the verge of a virtual collapse. The prevailing high crude oil prices, at over $100 a barrel, have badly affected the liquidity of the three oil marketing companies, which are losing over Rs 450 crore a day on domestic sales of petrol, diesel, PDS kerosene and domestic LPG.
IOC, BPCL and HPCL have already warned the petroleum ministry that if this uptrend in the crude oil prices continue during 2008-09, their borrowings would be very high and also ?impossible?. IOC, which is India?s largest refining and marketing firm, alone is losing close to Rs 320 crore a day on fuel sales. IOC?s borrowings have risen to Rs 35,400 crore as on March 31, 2008 and it had about Rs 17,000 crore worth of oil bonds in hand.
IOC chairman and MD Sarthak Behuria said his company the losses on fuel sales may soon see future projects of the company. ?This year we are ok…we can manage somehow. But if the situation continues for another one year, our projects may get impacted,? he said.
Official sources said the under-recoveries of the three state-owned OMCs on sales of petrol, diesel, domestic LPG and PDS kerosene may double this fiscal and touch Rs 1,50,000 crore in the absence of an appropriate compensation package. The three fuel retailers together lost Rs 77,304.50 crore on fuel sale in 2007-08.
Amidst growing inflation concerns?with inflation rate at a 30 month high of 7.4%?a fuel price hike seems highly unlikely. ?There are very few options available with petroleum minister Murli Deora. All he can ask for to save his OMCs from a virtual collapse is a cut in duties along with a mega oil bonds package,? said an official adding that Deora may meet the Finance Minister possibly on Friday or Saturday to discuss these issues. A detailed note on the revenue loss on fuel sale in 2007-08 has already been sent to the finance ministry for consideration.
Currently, the finance ministry compensates 42.7 % of the total under-realisation on fuel sale through issue of oil bonds. This is considered grossly inadequate by the Petroleum Ministry as is seeking 57-60 % of the total revenue loss to be met through oil bonds.
The OMCs are currently losing Rs 10.78 a litre on petrol, Rs 17.02 per litre on diesel, Rs 316.06 per LPG cylinder and Rs 25.23 a litre on kerosene as the government has not allowed public-sector fuel retailers to raise domestic prices in line with rise in international cost.