Losses on diesel sales narrow 27%

The losses had widened to Rs 3.40 a liter in the previous fortnight ended July 15 on supply concerns owing to Iraq crisis

With the decline in global crude oil prices continuing, oil marketing companies’ (OMCs) losses on diesel sales has narrowed 27 per cent to Rs 2.49 a litre, according to an official statement. The loss had widened to Rs 3.40 a litre in the previous fortnight ended on Tuesday on supply concerns owing to the Iraq crisis. The Indian basket of crude oil prices shrank from $108 a barrel in the previous fortnight to $104.2 a barrel on Tuesday. The contraction in diesel underrecoveries was further aided by a weaker rupee that closed at 60.2 a dollar on Tuesday from 60 a day before.

The government controls the retail selling price of diesel, kerosene and domestic cooking gas or liquefied petroleum gas (LPG) to insulate consumers from the full impact of high international crude prices. This results in under-recoveries to OMCs, part of which is compensated by the government through subsidies.

Beside diesel, oil firms lose Rs 33.07 a litre on kerosene sold through the Public Distribution System and Rs 449.17 on LPG as in the previous fortnight, said the statement. The OMCs are incurring a combined daily underrecovery of Rs 261 crore on sale of diesel, kerosene and LPG, with effect from Wednesday. This is lower than the Rs 271-crore-a-day underrecoveries during the previous fortnight.

The under-recoveries for the current financial year are projected to be Rs 91,665 crore as compared to Rs 1,39,869 crore last fiscal (2013-14). The narrowing of OMCs' losses on diesel sales is partly due to the continuing monthly 50 paise hike per litre since January 2013 - a decision taken by the previous government under United Progressive Alliance (UPA) regime to eliminate subsidy.

Diesel prices have cumulatively risen by Rs 10.68 a litre in 17 instalments since then and are expected to be deregulated in five months. The prices were last hiked by 50 paise a litre on July 1. The OMCs had on Tuesday cut the prices of bulk diesel, sold to industrial consumers like railways, in line with the decline in crude prices and the depreciating rupee. Price of bulk diesel was cut by Rs 1.09 a liter to Rs 59.32 a liter in Delhi.

Diesel prices for bulk supply were aligned with market rates in January last year. Diesel prices for retail consumers were left untouched at Rs 57.84 per liter.