State-owned fuel retailers have seen losses on diesel sale touch a record Rs 15.79 per litre as government continues to bar them from raising rates in line with spurt in cost of raw material (crude oil).
Indian Oil Corp (IOC), Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL) are selling diesel, domestic LPG and kerosene way below cost as the government battles to control inflation.
"Diesel is being sold at a discount of Rs 15.79 per litre to its imported cost," an industry official said.
Finance Minister Pranab Mukherjee had in his Budget for 2011-12 ignored calls for a reduction in customs and excise duty to contain the impact of a spurt in global crude oil prices, which are ruling at a two-year high of over USD 100 a barrel.
The retail price of diesel would have to be hiked by Rs 15.79 a litre if the government was to implement its June, 2010 decision of freeing pricing of the most-consumed fuel from its control.
The three state retailers are together losing about Rs 285 crore in revenue everyday on the sale of 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 24.74 per litre on kerosene and Rs 297.80 per 14.2-kg LPG cylinder.
The three firms are losing a cumulative Rs 432 crore in revenue every day on selling diesel, domestic LPG and kerosene below cost.
"They will end the 2010-11 fiscal with a revenue loss of Rs 78,061 crore," the official said.
In addition, they suffer a loss of about Rs 4.50 a litre on petrol sales, even though its 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 Corp (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 for the three state-run fuel retailers.
