Crude shock: IOC may take Rs 2143 cr hit

Indian Oil Corporation today said it could lose Rs 2,143 crore revenue during the first quarter of the current financial year as the government has not allowed it to raise retail prices in line with global crude prices.

The company is expecting an under-recovery of Rs 504 crore on petrol and diesel during April-June. IOC stands to lose another Rs 888 crore on kerosene and Rs 751 crore on cooking gas, where prices have remained untouched since May 2002.

The price of crude oil imported by India rose to $38 a barrel at the end May 2004 from $28.4 in December, when petrol and diesel prices were last revised. It now costs $34.50. According to estimates, a $1 increase in the price of crude results in a 60 paise loss for oil companies in case of petrol and 40 paise in case of diesel.

Going by the estimate, petrol prices would need to be increased by Rs 4.20 a litre and diesel by Rs 2.80 a litre to stop the oil companies from losing revenue.

"Though we will not suffer losses, it is not sustainable without a price increase.... Our profitability will be very badly eroded," IOC chairman MS Ramachandran said at a press conference to announce the company's annual results for 2003-04.

Ramachandran suggested that the subsidy should be borne by all companies, including the upstream petroleum majors.

Last year, the government had devised a formula to distribute the cooking gas subsidy burden to Oil and Natural Gas Corporation and GAIL as well.

ONGC's under recoveries were estimated at Rs 2,600 crore during 2003-04 while it was estimated at Rs 8,200 crore for the public sector oil companies.