New fiscal brings bad news for oil cos

The first fortnight of the current financial year has seen a sharp rise in the daily losses of the oil companies "" from Rs 120 crore to Rs 140 crore "" due to the upswing in crude oil prices.

The average prices of the Indian basket of crude oil jumped to $66.12 a barrel in the first fortnight of the new financial year against the last month's average price of $60.26 per barrel, officials said.

The losses, or under-recoveries as they are often referred to, are calculated every fortnight for petrol and diesel, while they are calculated every month for the other two subsidised products "" LPG and kerosene.
 

INDIAN CRUDE OIL BASKET ($/barrel)
Month	Average
Apr (so far)	65.92
Mar	60.26
Feb	56.53
Jan	52.53
Dec	60.35
Jan-Mar	56.50
Apr-Jun	67.13
Jul-Sep	67.71
Oct-Dec	58.45

Indian Oil Corporation (IOC), the country's largest marketing company with almost 63 per cent of the total retail outlets, is losing Rs 5.17 per litre on the petrol it sells in the domestic retail market against a loss of Rs 3.87 per litre in the fortnight ended March 31, 2007. The company is losing Rs 4.67 a litre on diesel, up from Rs 3.12 a litre in the last fortnight of 2006-07.

REVENUE LOSS (in Rs/litre)
	Apr 1-15	Mar 16-31
Petrol	5.17	3.87
Diesel	4.67	3.12
LPG*	161.00	161.00
Kerosene	13.79	13.79
*per 14.2 kg cylinder

Industry analysts attribute the rising losses, that the oil marketing companies are incurring, to the high prices of the Indian basket of crude oil. "Prices are in fact expected to increase further in the near term as long as tension in West Asia does not abate," a Delhi-based analyst said.

The price of the Indian basket of crude oil hit $67.06 on April 13, the highest it has reached in the last six months.

In the first fortnight of the current financial year, the average price of the Indian basket has been over $66 a barrel. The petroleum ministry, however, is still waiting to study the average prices of crude oil over the next couple of months before prices of petrol and diesel are raised.

Officials in the petroleum ministry recently told Business Standard that prices of petrol and diesel were not likely to be revised in the next couple of months at least. "We have to take a look at the global crude oil prices over the next couple of months before a price revision is possible," an official in the ministry said.

The government had twice cut prices of petrol and diesel by Rs 2 a litre and Re 1 a litre respectively in November and March in the last financial year. That was after prices were raised by Rs 4 a litre and Rs 2 a litre on petrol and diesel respectively in June last year. The average price of the Indian basket of crude oil was $67.13 a barrel in the first quarter of the last financial year, when the prices of automobile fuels were raised.

The oil marketing companies "" IOC, Hindustan Petroleum and Bharat Petroleum "" are compensated for selling petrol, diesel, kerosene and LPG below market prices, through the oil bonds issued by the government and the discounts offered by upstream companies. The government had given out almost Rs 24,000 crore worth of oil bonds in the last financial year from the approved Rs 28,300 crore.

"In a couple of months, we will also make an estimate of the under-recoveries that the oil marketing companies are likely to incur, and budget for oil bonds accordingly. However, that will not take place before a couple of months," the oil ministry official said.