State-owned fuel retailers have seen losses on diesel sale touch a record Rs 10.74 per litre as government continues to bar them from raising rates in line with spurt in cost of raw material (crude oil).
Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) sell diesel, domestic LPG and kerosene way below cost as government battles to control inflation.
"Diesel is being sold at a discount of Rs 10.74 per litre to its imported cost," an industry official said.
Oil Minister S Jaipal Reddy had yesterday ruled out any increase in fuel prices despite crude oil prices touching $100 per barrel.
Retail price of diesel will have to be hiked by Rs 10.74 a litre if the government was to implement its June 2010 decision of freeing pricing of most consumed fuel from its control.
The three state retailers are together losing over Rs 247 crore per day in revenue on selling diesel below its imported cost.
"This is the biggest loss they have ever incurred," the official said.
Besides diesel, IOC, BPCL and HPCL are losing Rs 21.60 per litre on kerosene and Rs 356.07 per 14.2-kg LPG cylinder.
The three firms are losing a cumulative Rs 430 crore in revenue every day on selling diesel, domestic LPG and kerosene below cost.
"For the full fiscal, the three are projected to lose Rs 76,559 crore in revenues at current prices," the official said.
In addition, they suffer a loss of about Rs 2.50 per litre on petrol sales, even though prices were freed from government control in June last year.
If prices are not hiked, the government will have to come up with other ways to compensate the oil marketing companies for their losses.
The Oil Ministry wants the Finance Ministry to compensate the oil companies in cash for at least half of their under-recoveries by making adequate provisions in the Budget.
Upstream oil firms like Oil and Natural Gas Corporation (ONGC) will shoulder one-third of the burden.
For the first nine months, the Finance Ministry has approved the release of a cash compensation of Rs 21,000 crore to the three state-run fuel retailers.
