The borrowings of oil marketing companies (OMCs) over the next three months would touch a record high, despite a rise in fuel prices and rejig in duty structure in June.
Indian Oil Corporation (IOC), Bharat Petroleum and Hindustan Petroleum are incurring a daily loss of Rs 235 crore but have not received any cash subsidy from the government for the current year.
In spite of the rise in price of the three controlled products in June, these companies are expected to have an under-recovery or revenue loss of Rs 121,000 crore this year.
IOC, the biggest petroleum marketing company, is expected to have a borrowing of Rs 85,000 crore by December against the current borrowing of Rs 70,000 crore. This is an all-time high.
| SLIPPERY ROAD |
| * IOC is expected to have a borrowing of Rs 85,000 crore by December |
| * Hindustan Petroleum has a borrowing of Rs 26,500 crore |
Director (finance), P K Goyal, said this would happen if no cash compensation is released before the supplementary budget, to be taken up only in the winter session of Parliament.
No cash has been given to the company for losses incurred so far in the current financial year. It had to absorb a loss of Rs 7,673 crore and reported a net loss of Rs 3,179 crore.
More From This Section
IOC, which raised $500 million through bonds recently, may have to raise more money in the current financial year. “We will wait till December to see what compensation is released by the government” he said.
The company incurred an interest cost of Rs 2,670 crore last year. In this year's first quarter, the interest burden was Rs 1,040 crore. Goyal said this year's interest cost could be as high as Rs 4,000 crore due to higher borrowings and hardening of rates.
Hindustan Petroleum, which had an all-time high borrowing of Rs 29,000 crore in 2008 when crude oil prices had touched a record $147 per barrel, has a borrowing of around Rs 26,500 crore. Its director (finance) B Mukherjee said the company will have to borrow up to Rs 1,500 crore every month for working capital requirement if cash compensation is not released. The situation is similar for Bharat Petroleum.
Petroleum minister S Jaipal Reddy told the Parliamentary Consultative Committee last week the “under-recoveries have had a significant adverse impact on the financial health of the OMCs, with diminishing cash flows and reduced resource generation. The OMCs are forced to borrow heavily from the market even for their working capital requirement, which is leading to mounting interest burden on them.”