Oil firms ride out of trough

No loss on sale of petrol, diesel from Wednesday.

Starting today, public sector oil marketing companies have stopped making losses on the sale of petrol and diesel. With international crude oil prices falling from the peaks reached in September, these companies are now, for the first time in the year, selling petrol and diesel at a small profit.

During the first fortnight of this month (November 1-15), the international price of diesel was $57.33 a barrel, down sharply from the October average of $67.97 a barrel. For petrol, the fall was lesser "� from $62.85 in October to $61.18 during November 1-15.

When the government had increased the retail price of diesel on September 6 by Rs 2 to Rs 30.45 a litre, the fuel's international price was $71.78 a barrel.

Oil companies were still making a loss of about Rs 3.50 on every litre of diesel sold. For petrol, the retail price was increased by Rs 3 to Rs 43.49 a litre when its international price was $78.39 a barrel, leaving oil companies with a loss of about Rs 4.50 a litre.

Clearly, the fall in international diesel and petrol prices has been sharp enough to wipe out the losses.

Executives of oil companies were tightlipped about the profit figures. But industry sources said it could range from 13-23 paise a litre in petrol and 40-50 paise a litre in diesel. Executives told Business Standard that if full marketing margins were taken into consideration, the present under-recovery would be Rs 1.17 a litre for petrol and 90 paise for diesel.

According to a government decision at the time of dismantling of the administered price mechanism in 2002, oil marketing companies were allowed marketing cost and marketing margins of around Rs 1.30 to 1.40 a litre on petrol and diesel.

However, executives of oil marketing companies told Business Standard that they were still falling short of the full marketing margins. "If full margins were taken into consideration, there would still be an under-recovery of Rs 1.17 a litre on petrol and 90 paise on diesel," an IndianOil executive said.

The under-recoveries on the sale of petrol, diesel, kerosene and cooking gas had severely impacted the profits of the oil marketing companies. While IndianOil posted a profit of Rs 950 crore in the first half of the current financial year, all others reported a loss: BPCL of Rs 203 crore, HPCL of Rs 215 crore and IBP of Rs 190 crore.

"All through the year, we have not been making any margins on the two products unlike last year when these products had an under-recovery but no losses," said the IndianOil executive.

Executives in oil marketing companies also said there would be no downward revision of prices of the two transport fuels since the companies were still incurring losses on the sale of cooking gas and kerosene.