IOC hopes for fuel pricing reforms
New Delhi   27-May-2010

STATE-RUN IndianOil expects the government to soon reform the country's fuel pricing system and has a budget of $1 billion to acquire oil and gas assets abroad, its chairman said on Wednesday.

IOC, biggest fuel retailer in India, may have to cough up net revenue loss of about Rs 3,000 crore ($638 million) in the last fiscal ending March because of government control on fuel prices, B.M. Bansal said at the Reuters Global Energy Summit in New Delhi.

The Indian government caps the retail prices of gasoline, diesel, kerosene and liquefied petroleum gas (LPG) to protect the poor and control inflation.

"The immediate challenge in my hand is how to arrange finances for continuous growth.... to some extent our projects have been delayed," he said.

A ministerial panel is scheduled to meet on June 7 to consider the recommendation of a government panel on fuel pricing.

Bansal expects the government would now initiate reforms in fuel pricing after taking a bold step to more than double the prices of gas in one stroke.

"My view is that the government may free petrol pricing and for diesel, there could be a partial deregulation as the impact of the diesel will be more," he said.

"Indian demand was growing in difficult times also, I expect it to be 3-4 per cent this year," he said.

In 2009-10, oil product consumption, a proxy for oil demand in Asia's third-largest oil consumer, rose an annual 3.5 per cent to 138.18 million tonnes, the data showed, higher than government estimates of 2.4 per cent.

He said the recent rise in IOC's diesel imports is "temporary", as cleaner fuel projects at some of its plants including Barauni in eastern India and Chennai in the south had been delayed.

But these projects will be on stream by the October 1 deadline. Bansal expects about Rs 10,000 crore in revenue from product sale from its Panipat naphtha cracker, the largest such plant in India.