The Rs 2/litre cut in petrol and Re 1/litre reduction in diesel prices, announced last week, will increase the loss on auto fuel sales by Rs 300 crore, according to Crisil Research."Industry losses would increase by Rs 300 crore to Rs 19,100 crore," Crisil Research said in its report 'Impact Analysis: revision of Auto Fuel Prices'.On account of last week's price revision, the margins on auto fuel would slip to negative Rs 1.91 per litre as compared with negative Rs 1.87 per litre, without considering the latest price revision."This would, therefore, result in the under-recovery on auto fuels increasing by another Rs 300 crore for the rest of FY07 fiscal," it said.In FY06, the industry clocked an average margin of negative Rs 1.48 per litre.Although crude oil prices have jumped by nearly 11% year-on-year (Y-o-Y), retail product prices have not been aligned to reflect this increase in raw material costs."Thus, besides the pressure on gross refining margins, this is the key reason for the industry to report higher losses of Rs 19,100 crore in FY07 vis-a-vis Rs 8,900 crore in FY06," the report said.Crisil Research estimated that the incremental burden on the government on account of the recent price cut will be around Rs 300 crore."This, along with the financial assistance that was required prior to the price revision, adds up to Rs 600 crore. Of this, Crisil Research expects the government to issue oil bonds of Rs 400 crore, with the balance to be borne by the upstream players," the report said.
