PSU oilcos' under-recoveries may cross Rs 2 lakh cr in FY09
New Delhi   16-May-2008
For the aggrieved oil marketing companies, losses from selling fuel below cost could shoot by over two and a half times in 2008-09 at current crude prices, and could affect their borrowing capacity in the next three months, a top industry player said. IndianOil chairman Sarthak Behuria., said oil marketing companies lose over Rs 300 crore a day, as they have to sell petrol and diesel at subsidized prices even as the crude prices have shot be-yond$120abarrel. IndianOil, which is the country's largest oil retailer, and its PSU rivals such as Hindustan Petroleum and Bharat Petroleum, could together lose Rs 2 lakh crore in 2008-09, up from Rs 77,000 crore in 2007-08. While a chunk of these losses would be made good by the government through its oil bonds, and upstream suppliers such as ONGC through discounts, the companies would still face working capital issues, Mr Behuria said. "An oil bond is just a piece of paper, not cash," he said. These losses could affect borrowing capacity three months down the line, unless government does something about it he added. Already, the oil marketing companies are struggling with the additional burden of having to take on 22 % of losses due to under recovery, against the usual 10%. Last year, they pegged the losses at Rs 77,000 crore, expecting the government to take up 57% by issuing oil bonds. However, the government arrived at a lower figure of Rs 70,000 crore, and agreed to fund only 50% of its own estimate. In effect, government will be funding only 45%. Upstream players will fund 33%, leaving oil-marketing players to take up the remaining 22%. IndianOil's share would be about Rs 9,600 crore, Mr Behuria said. This year, crude prices have snot up even runner, an a me losses at the end of the year could turn out even more than the profits made by upstream companies. "We hope government will do something about it," he said. The solution could be a mix including an increase in retail price, lower duties, quota on some of the products, he said. "You can have subsidy regime, only with quota regime. You cannot have both," he said.