In June 2008, the under recoveries of OMCs on sensitive petroleum products were estimated to be around Rs 2.45 lakh crore for 2008-09 on account of continuous spike in international crude oil prices.
Of the Rs 1,00,000 lakh crore estimation Rs 2,675 crore under-recoveries has been estimated for petrol, Rs 52,096 crore for diesel, Rs 28,592 crore for PDS kerosene and Rs 16,760 crore for domestic LPG.
Sources revealed these details to FE on Wednesday before the cabinet committee meeting on economic affairs, which was to take up the proposal to reduce prices of petrol by Rs 5 per litre and diesel of Rs 2 per litre. In December last year, the government had reduced prices of petrol by Rs 5 per litre and diesel of Rs 3 per litre following rise in the OMCss margins.
The oil marketing companies have suffered a loss amounting to Rs 14,431 crore for the period April-September '08.
The major reason for reporting loss has been inadequate compensation of under recoveries on sensitive petroleum products. Further, sources informed the difference between the required prices based on trade/import parity and actual selling price realised (excluding taxes, dealer commission) results in the under-recoveries of oil companies.
According to sources, the ministry had estimated the under-recoveries of Rs 2.45 lakh crore for 2008-09 after the Indian basket of crude oil which averaged $79.25/bbl during 2007-08, had surged to an unprecedented level of $142.04/bbl in July last year before declining sharply due to fall in demand on account of economic recession in major oil consuming countries in the world.
The average price of Indian basket of crude oil during December was $40.61/bbl and is $45.39/bbl for January 2009. The average price during 2008-09 is $94.38/bbl.
Due to the decline in crude prices, OMCs are earning a profit of Rs 9 per litre on petrol and Re 1 on diesel.