Oil firms seek Rs 5 hike in diesel price

The Cabinet is likely to consider on April 8 a demand from state owned firms to raise petrol prices by Rs 4.69 a litre and diesel by Rs 5.18 per litre in step with the surge in crude oil prices and increase in excise duty.

"We are likely to lose Rs 300 crore in revenues on selling petrol and diesel below the imported cost during the first fortnight of April," said S Behuria, chairman, Indian Oil Corporation, the country's largest oil firm.

The price of petrol needs to be raised by about Rs 2.19 per litre and diesel by a little less than Rs 4 per litre as a fallout of crude oil touching historic highs of $58 a barrel.

Besides, the increase in excise duty and levy of additional road cess, announced in the Budget for 2005-06, necessitate another Rs 2.20 per litre raise in petrol and Rs 1.06 per litre in diesel prices.

Additionally, the supply of ultra-low sulphur fuel from April 1 warrant a Rs 0.30 per litre raise in petrol and Rs 0.34 a litre hike in diesel prices, he said.

"We lost Rs 1100 crore in revenues on selling petrol and diesel below the import cost in 2004-05. Another Rs 7200 crore was lost on kerosene for PDS and domestic LPG," Behuria said.

Domestic LPG is currently being under-priced by Rs 82 a cylinder and kerosene for public distribution system (PDS) by Rs 10.4 a litre.

Revenue loss to IOC on LPG and kerosene in the first fortnight of April was Rs 350 crore, he said.

IOC controls roughly half of the retail market and the revenue loss for the industry as a whole will be double its under-recoveries.

IOC's net profit had fallen 47 per cent in the third quarter ended December 31, 2005 as it lost Rs 2636.33 crore on selling domestic cooking gas (LPG), kerosene and diesel below the cost.

Petrol, diesel, LPG and kerosene prices have not moved in tandem with the change in cost of raw material (crude oil). Besides, government subsidy on LPG and kerosene has remained inadequate to cover for the difference between the sale price and the cost, resulting in huge under-recoveries.

IOC lost Rs 2868.11 crore on the sale of kerosene in April-December, Rs 2129.82 crore on LPG, Rs 1360.71 crore on diesel and Rs 137.32 crore on petrol.

IOC, which got Rs 2501 crore from upstream firms in April-December to cover for part of the under-recoveries on LPG and kerosene, has estimated a total loss of Rs 7566.80 crore on LPG and kerosene sale during the full 2004-05 fiscal.

"We estimate under-recovery of Rs 4000 crore on LPG and Rs 3200 crore on kerosene," Behuria said.