Essar Oil hikes petro prices

Essar Oil has decided to increase its retail prices of diesel and petrol by Rs 3.60 a litre. The oil marketing company, which buys petrol and diesel from Numaligarh and Mangalore refineries, is staring at a loss of over Rs 60-crore during the quarter ending June 30.

The company was already incurring a loss of around Rs 5.75 a litre in petrol and Rs 6.50 a litre in diesel when the two refineries raised their prices by Rs 1.04 a litre for petrol and Rs 0.93 a litre for diesel excluding duty and taxes, thereby further increasing the company's losses.

According to a letter dispatched to its franchisees, Essar Oil had expected some downward revision in duties to take place on June 1. As that did not happen, the company waited for a Cabinet decision on June 16.

"Unfortunately, the expected duty adjustment and price increase has not materialised even on June 16," said the letter justifying the increase to its franchisees.

"Since we do not have a refinery, the opportunity of making up our losses in marketing through gains in the refinery does not exist. Once our refinery is commissioned in mid-2006, we are confident that the present problem won't recur," said the letter.

The company has taken this decision even at the risk of losing some of its sales from its 510 retail outlets to public sector competitors where the government has not allowed a price increase.

A N Sinha, managing director and CEO, Essar Oil, confirmed that the company was left with no choice but to increase prices to partially offset the huge increase in product prices.

"We are committed to protecting the interests of our franchisees and hope that the problem will be resolved soon," he said, adding that the company would continue to make investments in developing a country-wide marketing and distribution network.