Oil marketing firms regulate supplies to help cap fuel losses
New Delhi   08-Jul-2008
With global crude oil prices expected to cross $ 150 a barrel soon, state-owned oil marketing companies IndianOil, Bharat Petroleum and Hindustan Petroleum fear a complete erosion of profits in 2008-09. Speaking to FE, the CMD of India's largest oil retailing firm, IndianOil, Sarthak Behuria, said, "The year is going to be very bad for the oil industry. We can sustain one bad year, but not two in succession. With oil prices on the boil, we have to initiate demand-side measures." In order to minimize losses on the sale of petroleum products—expected to cross Rs 3 lakh crore this fiscal—the oil marketing firms have already started regulating supplies, especially diesel, to petrol pumps and LPG to agencies across the country. India is a net importer of both diesel and LPG. Oil companies also admit that they are pushing sales of branded premium fuels to help cap losses. "Customers using cars (both petrol and diesel) are capable of shelling out that extra Rs 3-4 a litre," Behuria said. Asked about the shortages of diesel reported from various parts of the country, Behuria asked, 'Are these shortages for real? We had planned for a 9-10% growth in diesel sales during the year. Now, if we face a sudden increase in demand at 30%—which is more on account of diversion for running gensets-the genuine consumer is bound to suffer." Parts of the southern and western regions have already witnessed long queues at petrol pumps because of low availability of fuel in the last few days. Petrol pumps are increasingly refusing to sell diesel or are offering costlier branded fuel. In response, Behuria said, "IndianOil has already increased its release of petrol and diesel to pumps by 12-15%, against the 9%growthplan,But if there is a sudden 30% jump in demand, we cannot meet it. We have already made it clear that supplies of petroleum products will be strictly in line with domestic availability." The last hike in petroleum product prices, together with cut in customs and excise duties, had only marginally offset the Rs 2.45 lakh crore in projected revenue losses at that time.