Underrecoveries, delayed compensation prompt oil marketing companies to project low resource generation in 2010-11
Delayed compensation and continued underrecoveries have prompted public sector oil marketing companies (OMCs) — Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) — to budget for a lower internal resource generation in 2010-11.
The internal resource generation of IOC and BPCL is projected to be lower by 23.6 per cent and 43.6 per cent, respectively, according to the Budget for 2010-11. HPCL, however, pegged the next financial year’s internal resource generation at nil, compared to Rs 940 crore according to the revised estimates of 2009-10.
“These numbers are based on profit projections made on the basis of certain assumptions. But the final figures might be different since crude oil prices keep fluctuating. Moreover, there is uncertainty about the government’s subsidy-sharing mechanism for underrecoveries, which we will incur next year,” said an official at BPCL.
BPCL projected an internal resource generation of Rs 1,022 crore, down 43.6 per cent from the current year’s revised estimate of Rs 1,813 crore. For the current year, the underrecovery on petrol and diesel is being compensated by upstream companies, while the same on kerosene and LPG is supposed to be compensated by the government.
IOC, the biggest OMC, pegged its internal resource generation in 2010-11 at Rs 5,390 crore, down 23.6 per cent from the current year’s revised estimate of Rs 7,061 crore.
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The three marketing companies are estimated to be together losing Rs 196 crore daily on sale of petrol, diesel, kerosene and LPG, with IOC alone losing Rs 107 crore. For the full year, they are estimated to have underrecoveries of Rs 46,600 crore.
After the discounts provided by upstream companies — Oil and Natural Gas Corporation, Oil India Ltd and Gas Authority of India Ltd — the OMCs are still left with losses of over Rs 31,000 crore.
While the Budget made a provision of Rs 12,000 crore for underrecoveries in the current financial year, there was nothing for those that would occur in 2010-11.
Meanwhile, no action has been taken on the Kirit Parikh committee report, which was submitted a month ago. The group had suggested market-linked prices for petrol and diesel. However, only a partial increase of Rs 6 a litre for kerosene and Rs 100 per LPG cylinder were proposed. It also proposed a reduction in kerosene sold through ration cards by 20 per cent. The OMCs incur an underrecovery of Rs 4.97 a litre on petrol, Rs 3.27 a litre on diesel, Rs 16.91 a litre on kerosene and Rs 267.39 on a domestic LPG cylinder.