Growing under-recoveries worry oil marketing firms
Chennai   04-Apr-2012

Worried over growing under-recoveries, oil marketing companies (OMCs) on Monday said availability of fuel, particularly petrol, could become difficult in the days to come as they would not have enough money to import crude oil.

“The situation is very critical. We are losing Rs.7.67 per litre on petrol and after adding 20 per cent sales tax, the desired increase in rates in Delhi is Rs.9.20 per litre.

“Our 93 per cent of cost of production is on account of crude oil, which we have to import. If we don't earn revenues from fuel sales, we would not be able to buy crude oil, and if we are unable to buy crude, there will be fuel supply disruptions,” IndianOil Chairman R. S. Butola told journalists here.

OMCs such as IndianOil, Bharat Petroleum and Hindustan Petroleum are losing Rs.48 crore per day on sale of petrol. “This is a peculiar scenario where the Central Government earns Rs.14.78 on every litre of petrol sold (in excise duty) and States get anything between Rs.10 and Rs.20 per litre. But the oil companies are not allowed to earn anything,” Mr. Butola pointed out. These companies have asked the government to cut the excise duty on petrol to compensate for the losses. “We had clearly told the government that if these demands are not accepted, then oil companies will have no option but to raise petrol prices…we haven't heard from the government so far,” Mr. Butola added. After deregulation of petrol prices in June 2010, OMCs are supposed to review petrol price twice a month — on 15 and end of every month.

These oil PSUs are also losing money on sale of diesel, kerosene and cooking gas. While Rs.14.36 is the amount of subsidy on sale of every litre of diesel, the under-recovery in the case of kerosene is Rs.31 per litre and Rs.570.50 in the case of each domestic LPG cylinder.