Post-Budget, oil PSU losses mount

Despite the relief provided by the cut in excise duty on petrol and diesel in the Budget, the losses of oil marketing companies (OMCs) are on a steep uptrend due to a rise in the price of crude oil.

The country's largest oil-marketing company "" Indian Oil Corporation (IOC) "" lost Rs 4 on every litre of petrol it sold during the fortnight ended March 15. This is over three times higher than the loss of Rs 1.24 per litre recorded for the fortnight ended February 28.

The OMCs calculate their under-recoveries on retail sales of automobile fuels every fortnight, on a retrospective basis. The last calculation was done for the fortnight ended March 15.

The under-recovery on diesel was Rs 2.60 per litre as against Rs 1.52 a litre for the preceding period. 

UNDER-RECOVERIES FOR FORTNIGHT ENDED...
(Rs/litre)		*Rs per cylinder
February 28		March 16
Petrol	1.24	Petrol	4.00
Diesel	1.52	Diesel	2.60
Kerosene	12.75	Kerosene	12.75
LPG*	173.00	LPG*	173.00
INDIAN BASKET OF CRUDE OIL
($/barrel)
PERIOD	PRICE	PERIOD	PRICE
19-Mar	58.75	Sep average	61.04
16-Mar	58.83	Aug average	70.84
Feb average	56.53	Apr-Jun average	67.13
Jan average	52.53	Jul-Sep average	67.71
Dec average	60.35	Oct-Dec average	58.45
Nov average	57.80	FY07 average (so far)	62.49
Oct average	57.27	FY06 average	55.72

The under-recoveries on the other two petroleum products "" LPG and kerosene "" were at Rs 173 a cylinder and Rs 12.75 a litre, respectively.

Three OMCs "" IOC, Hindustan Petroleum Corporation and Bharat Petroleum Corporation "" were together losing over Rs 100 crore a day due to these under-recoveries, oil industry officials informed.

In March, the average price of crude oil for Indian refiners has been $59.38 a barrel, higher by 5.04 per cent over the $56.53 a barrel price in February.

In the fortnight ended March 15, the average price of the Indian basket of crude oil was above $60 a barrel. About 70 per cent of India's crude requirements are imported.

"The higher international price of crude oil has negated the 2 per cent excise duty cut in Budget," an oil analyst said.

The government issues oil bonds to partly share the burden of under-recoveries of oil companies. IOC Chairman Sarthak Behuria said if the government released oil bonds before the end of the quarter, the company would end the quarter in March in the positive territory.

"It all depends on the bonds. The last three quarters were good because we sold the stake we held in the ONGC," he said.

Reports suggest the government is planning to release a tranche of bonds worth Rs 5,000 crore. "If we get even half the amount, we will be in the black in the March quarter," Behuria said.

The government has so far this fiscal released bonds worth Rs 19,500 crore to the public sector OMCs. The total allocation for the year was Rs 27,300 crore.

When prices of petrol and diesel were last cut by Rs 2 and Re 1 a litre, respectively, on February 16 this year, Petroleum Secretary MS Srinivasan had said that the OMCs would be compensated for the extra pressure on their margins through the left-over oil bonds.

He also said the companies, which were making a profit of around Rs 2 a litre on petrol at that time, would have flat margins. A month after the price cut, the margins on both petrol and diesel have become negative.