Indian oil basket hits new high

Prices touch $94.96; FinMin mulls duty cut; Petrol, diesel may not ease.

The price of the basket of crude oil that Indian refiners buy hit an all-time high of $94.96 a barrel on Wednesday, the latest day for which data is available, even as the price of oil in New York touched a fresh high of $101.32 a barrel, rising more than 16 per cent over the last fortnight.

With global prices continuing to climb, the effect of the hike in retail prices of petrol and diesel, allowed by the government a week ago, has "been negated already," said an official with Indian Oil Corporation (IOC), the country's largest marketer of petroleum products.

After the hike, at an average price of the Indian oil basket of around $85 a barrel, the oil marketing companies were estimated to reduce their retail losses by Rs 840 crore from the projected annual figure of Rs 71,800 crore. The average price of the basket this month has been $90.79 a barrel.

The increasing retail losses of the three government-owned oil marketing companies "� Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL) and IOC "� has made the case for a cut in taxes on oil and oil products stronger.

"A cut in duties on petroleum products is being seriously considered by the finance ministry," said a senior government official.

The industry has been demanding that customs duty on crude oil be reduced from 5 per cent to 2.5 per cent, while that for petrol and diesel be brought down from 7.5 per cent to 5 per cent. A demand for the cut in excise has also been made to the finance ministry.

A cut in taxes on petroleum products, however, may not result in lower petrol and diesel prices, said a senior petroleum ministry official.

"The oil companies are likely to be given the freedom to enjoy the benefit of lower taxes on petroleum products, if they are announced in the budget."

"The oil companies' net realisation from petrol and diesel sales is one of the lowest in the world," said the official added.

Since government-owned oil marketing companies, which also operate refineries, sell most of their petrol and diesel domestically, it results in losses for them.

Reliance Industries exports most of its products to the US retail markets where the taxes are low and, as a result, realisations are higher.