Losing Rs 200 crore a day, IOC says there is need to raise petrol prices
New Delhi   02-Mar-2011

IndianOil on Tuesday said there was a need to raise petrol prices. But a decision on raising the price of petrol, on which retailers have pricing freedom, is yet to be taken. The oil marketing company said it was losing more than Rs 200 crore a day on selling cooking gas and auto fuel below cost.

Sources said former ONGC Videsh MD Rs. Butola, who took over as IOC chairman on Monday, may take a day or two to settle down and firm up a view on raising the petrol price in consultation with the petroleum ministry that represents the majority shareholder in the company. Ministry officials declined to comment on the pricing issue.

Petroleum minister S Jaipal Reddy told the Parliament on Tuesday that retailers take pricing decision on petrol based on the global and domestic market conditions and that the government has no control over how crude oil price moves in global markets. “The government is, however, keeping a close watch on the prices of petroleum products to protect the interests of consumers,” Reddy said.

After petrol price was decontrolled in June last year, retail price has gone up 22% but retailers are still suffering losses as they have not raised the price to the extent crude price appreciation had warranted. The Indian basket of crude has risen by $14.98 a barrel since the last price revision in petrol in mid-January to $109.55 a barrel on Monday, necessitating another round of price increase by retailers.

Retailers IOC, HPCL and BPCL were awaiting a cut in the import duty on crude oil, a corresponding reduction in the customs duty on petrol and diesel and a reduction in the specific excise duty on the finished products so that companies could improve price realisation without raising the retail price. However, finance minister Pranab Mukherjee did not oblige to them in his Budget for the current fiscal. The three firms together more than about Rs 430 crore a day.

For 2010-11 fiscal, the finance ministry allocated only a subsidy of Rs 38,386 crore, whereas, retailers' losses on account of selling fuel below cost is expected to mount to Rs 75,000-80,000 crore. One third of this loss is borne by upstream companies ONGC, Gail India and Oil India. The unmet losses have to be either passed on to consumers or be absorbed by the retailers.