Delay in govt subsidy drags oil firms into red
New Delhi   10-Aug-2012

IndianOil on Thursday announced its biggest ever quarterly loss of ` 22,451 crore for the April- June quarter of the current financial year. This is because the finance ministry has delayed the reimbursement of the government's share of the subsidy burden on diesel, LPG and kerosene to public sector oil companies.

Similarly, Hindustan Petroleum Corporation Limited (HPCL) also announced its highest ever net loss of ` 9,249 crore for the quarter. Bharat Petroleum, the third public sector oil marketing company, is also expected to pile up a loss of around the same amount.

The government has not compensated oil companies this year for selling diesel, domestic LPG and kerosene below the market price as the ` 40,000 crore fuel subsidy it had allocated in this year's Budget has been exhausted in paying compensation pending for 2011- 12.

The oil firms are not allowed to increase the prices of diesel, LPG and kerosene by the government although the international prices of crude oil have been well above $ 100 ( ` 5,530) a barrel this year. These firms have to import over 75 per cent of their crude oil requirement and have to shell out hard cash upfront for making these purchases.

“The loss was primarily because IndianOil was not compensated ` 17,485 crore for selling diesel, domestic LPG and kerosene at a discount to its cost and another ` 950 crore loss in revenue on selling petrol below the market price," IndianOil chairman R. S. Butola said.

Since the government's compensation for the subsidy has been delayed, the companies have to take recourse to borrowing at high interest rates and are being stretched to the limit.

The three public sector companies are losing about ` 710 crore per day on selling diesel, domestic cooking gas (LPG) and kerosene at government controlled rates.

Apart from this, the government has not allowed them to raise the price of petrol either, although the fuel has been deregulated.

The three fuel retailers are projected to lose a record ` 1, 77,715 crore this fiscal as they sell diesel at a discount of ` 12.13 a litre, kerosene at ` 28.54 and LPG at a discount of ` 231 per 14.2- kg cylinder.