OMCs absorbed more than Rs.10k crore on petrol sales since deregulation
New Delhi   08-Dec-2012

It was in June 2010 when the Centre took the bold step of deregulating the price of petrol and linking it with international markets to reduce the burden of oil marketing companies facing huge losses.

But even after implementation of the market determined pricing, the OMCs have been making price revisions of petrol in a guarded manner, absorbing the part of recovery themselves.

The OMCs together absorbed around R10, 045 crore under-recoveries on account of petrol since de-regulation. In several instances, due to pressure from political parties, the government was not able to revise prices according to their will. Facing pressure of a widening gap between domestic and global prices of petroleum products, the OMCs feel it is time the government to take a decision soon.

RS Butola, chairman, IndianOil made it on record that his company is making a strong case for bringing petrol under a regulated regime if a price hike was not possible.

This was compounded by the finance ministry's refusal to compensate companies for their losses on petrol sales.

During April-September 2012, oil marketing companies incurred a loss of R2,000 crore on sale of petrol due to inability to revise retail selling prices to the desired extent in line with market conditions.

The current retail price of petrol is R67.24/ litre in the national capital. The under recovery for the current fiscal was estimated to be R1, 80,000 crore before the diesel price hike. Post hike, the under-recovery stands at R1, 67,000 crore.

A senior government official said the finance minister has questioned the under-recovery calculations by the OMCs.

The issue was raised in August for the first time and again at a recent meeting with financial advisors of the ministries.

On the other hand, OMCs combined borrowings have already reached R1.58 lakh crore as on June 30 — R29,345 crore more than their borrowings of R1.28 lakh crore as on March 31.

The deteriorating liquidity condition has forced them to borrow from market at high interest cost to meet their working capital requirements and capital expenditure.