Oil marketing firms may see Rs 2,900 cr losses

Under-recoveries of oil marketing companies in the last fortnight of this month are expected to be around Rs 2,900 crore on account of petro products being priced below costs.

Moreover, the oil ministry is unlikely to permit state-owned oil marketing firms to bring domestic retail prices in sync with the steep rise in international crude prices till the monsoon session of Parliament ends. This is expected to keep under-recoveries at a high.

The under-recovery of Indian Oil Corporation, the largest oil marketing company, was expected to be around Rs 1,450 crore, a company executive said. This was likely to be approximately half the under-recovery of all oil marketing companies put together.

The Indian crude basket was priced at $73.96 a barrel on July 14, significantly higher than the average $66.80 in June 2006.

The government had recently said state-run oil marketing companies could revise retail prices of petrol and diesel on the last day of each month if the monthly average price of the country's crude oil basket crossed $70 a barrel.

Every $1 increase beyond $70 in the Indian crude basket will result in a price increase of 39 paise for petrol and 30 paise for diesel. In the case of kerosene, the increase will be 36 paise, while one LPG cylinder will get costlier by 67 paise.

The oil ministry has, however, ruled out any price hike till the end of the monsoon session of Parliament. The month-long session is scheduled to begin in the last week of July.

The average price per barrel from April 2006 to July 14 is $67.73. It was $55.72 for the April 2005-March 2006 period.