Oil prices set to rise by mid-May
New Delhi   26-Apr-2011

Oil marketing companies are gearing themselves up to hike petrol prices after assembly elections in mid-May. The largest oil marketing company, IndianOil (IOC) alone has incurred losses to the tune of Rs 297 crore per day for selling fuel below market cost. The company's debt has mounted to Rs 53,000 crore by March-end due to under recoveries on fuel prices.

The under-recovery (Rs 297 crore) is on account of selling diesel, domestic cooking gas and kerosene below market cost.

"We would like to do it (petrol price hike) at the earliest possible," company chairman R S Butola said without giving any further details. He did not divulge the likely increase in price of petrol, but indications are that it could be anything between Rs 2 and Rs 4 per litre.

Government de-regulated petrol prices in June last year. However, the companies have not increased prices of petrol even though Brent crude oil prices have crossed two-year high of around $ 120 per barrel. Besides IOC, two other stateowned oil-marketing companies are HPCL and BPCL.

Currently, the retail price of petrol is bench-marked at crude oil price of $ 100 every barrel. On the other hand, the Indian basket of crude has hit $ 120.47 per barrel as on Monday.

When asked why the company is not raising petrol prices even when crude oil prices have rallied northwards, Butola said, "We live in an environment.
If we take certain action, the environment is going to turn against us."

IOC is borrowing Rs 5,000-6,000 crore every month to meet the losses incurred on account of selling fuel below cost.

The country's largest oil marketer is losing close to Rs 297 crore. The refiner sells diesel at a loss of Rs 16.10 per litre, while kerosene is sold at a discount of Rs 27 every litre.
The domestic cooking gas is sold at a loss of Rs 316 every cylinder.

"Our debt was nearly Rs 53,000 crore as on March 31, 2011. We are borrowing around Rs 5,000-6,000 crore every month," Serangulam V Narasimhan, director of finance at IOC told reporters in the national capital on Monday.

Narasimhan added, "Our aim is to increase foreign currency debt. It is much cheaper. We will decide the borrowing plan, how much we need to raise, how much from overseas, once it becomes clearer how we will be compensated by the government."

In addition, IOC's capital expenditure for 2011-12 is pegged at Rs 14,500 crore, a 45 per cent increased against the previous year.