Oil firms refuse to budge
Mumbai   05-Nov-2011

Despite hue and cry from political parties over the latest hike in the petrol prices, oil marketing companies on Friday maintained that there would not be any roll back.

While several UPA allies —the Trinamool, the DMK and the NCP — joinedthe populist song of demanding a roll back in the petrol prices, the chief of India’s largest oil marketing company, Indian Oil, justified the price hike of Rs 1.82 per litre.

“The rupee has dipped from Rs 46.29 to a dollar at the time of the last hike to Rs 49.40 making oil imports costlier,” said RS Butola, CMD, Indian Oil Corporation, justifying the hike in petrol prices.

According to Butola, oil marketing companies were losing 22 paisa per litre of petrol till last month. “I understand that the hike is steep, but we are helpless. A one rupee depreciation would mean a loss of 90-95 paise,” Butola added.

To support Indian Oil’s argument, the oil ministry issued a statement saying: “The under-recovery of oil marketing companies for the first half of 2011-12 is Rs 64,900 crore.”

It further said the “combined losses of BPCL and HPCL for the first half are more than Rs12,000 crore and IOCL is also likely to be in red, if no further cash assistance is announced”.

This was the 13th hike in petrol prices since June last year.

The government had de-regulated petrol prices on June 25 last year, saying decontrol of petroleum products was necessary for a competitive market where prices would come down depending on the demand-supply situation.

While the government says it does not control the prices of petrol anymore, there have been clear instances of oil marketing companies holding back the decision of price hike. This year’s monsoon session was a prime example of such control, when the companies held back the decision to hike petrol prices till session lasted.

“The government is in a catch-22 situation. If it forces the companies to roll back the prices, share markets will react against the stocks of the oil marketing companies,” an analysts with a brokerage firm said.