State-run oil marketing companies IOC, HPCL and BPCL have seen their losses on diesel sales climb to almost Rs 7 per litre amid a steep rise in international crude prices.
"The three retailers, who calculate the desired retail price on 1st and 16th of every month based on the average international price in the previous fortnight, were losing Rs 6.09 per litre on diesel till last week. But this month, the losses have climbed to Rs 6.99 a litre," an industry official said.
Based on the average price of imported crude in the second fortnight of December, the three firms are losing Rs 275 crore in revenue every day on selling diesel, domestic LPG and kerosene at the subsidised rates dictated by the government, which are way below the actual cost.
"There was a meeting of the Empowered Group of Ministers (EGoM) headed by Finance Minister Pranab Mukherjee scheduled for last week to consider a hike in diesel and LPG rates, but it was postponed," the official said.
"Without the price hike, the gap between domestic retail price and their international benchmark is widening," he added.
Besides diesel, IOC, BPCL and HPCL are losing Rs 19.60 per litre of kerosene and Rs 366.28 per 14.2-kg LPG cylinder.
"For the full fiscal, the three are projected to lose Rs 72,812 crore in revenues at current prices," the official said.
If prices are not hiked, the government will have to come up with other ways to compensate the oil marketing companies for their losses. The Oil Ministry wants the Finance Ministry to compensate the oil companies in cash for at least half of their under-recoveries by making adequate provisions in the Budget, while upstream oil firms like Oil and Natural Gas Corp (ONGC) will shoulder one-third of the burden.
The Finance Ministry recently stated that it will meet no more than one-third of the actual revenue loss at the end of the current fiscal.
The official said in the absence of an adequate compensation package, the three fuel retailers will end the fiscal in the red.
In the second fortnight of December, 2010, IOC, BPCL and HPCL were losing Rs 6.09 per litre of diesel, Rs 17.72 per litre of kerosene and Rs 272.19 per domestic LPG cylinder.
On the basis of the average international oil price in the first fortnight of December, 2010, were projected to lose Rs 68,361 crore in revenue during the full fiscal.
But with international oil prices firming up to a two-year high of $92 per barrel, the revenue loss in 2010-11 is now projected at Rs 72,812 crore, the official added.