IOC seeks cut in kerosene quota

Move prompted by mounting under-recoveries

The mounting under-recoveries in kerosene and cooking gas have forced the Indian Oil Corporation (IOC) to seek a reduction in its allocation for kerosene quota and complete exemption for the IBP Co Ltd from selling kerosene and cooking gas.

IOC chairman and managing director MS Ramachandran has written a letter to the ministry of petroleum and natural gas on the issue.

The company has argued that its share of kerosene and cooking gas sales was more than its total share in the petroleum product business, officials told Business Standard.

The IOC-owned IBP is unable to absorb the losses since it is a purely marketing company with no refinery margins to fall back on. The IBP recorded a loss of Rs 69 crore during the first half of the current year mainly due to the non-revision of retail prices of petroleum products.

The IOC, on its own, claims to sell about 5.5 million tonnes of kerosene a year, which is roughly 60 per cent of the total sales though the public distribution system in the country. Added to this are the IBP sales of 0.5 million tonnes.

"Both the companies together hold about 65 per cent share in kerosene sales though the total market share of the IOC along with its subsidiaries in the petroleum product business is 56 per cent," said a senior official.

The petroleum ministry has not responded to the letter yet, but officials said the ministry was of the view that both the IOC and IBP would have to take care of their customers for the two products. The IBP has over 80 cooking gas dealers.

"The ministry feels that in the case of the IBP the losses can be absorbed by the IOC since the two companies will be merging by March 2005," said a ministry official.

The under-recovery on kerosene at the current level is estimated at Rs 11.20 a litre, while that on cooking gas is Rs 190 a cylinder. The price of kerosene was last revised in June 2003.

Cooking gas price was raised by Rs 20 on November 4. The government had also decided to allow the oil marketing companies a monthly increase of Rs 5, but the decision was rolled back on November 24.

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Oil's not well

• IOC has sought a cut in its kerosene quota and exemption for the IBP Co Ltd from selling kerosene and LPG
• IOC-owned IBP is unable to absorb losses due to under-recoveries, as it is a purely marketing company
• Oil ministry officials say IOC should absorb the IBP's losses since the two firms are set to merge by March 2005