After Finance Minister Pranab Mukherjee altered duties on auto fuels to raise revenues, the Oil Ministry is pressing for new ways to compensate state-owned retailers for losses they suffer on selling fuel below cost price.
Oil Secretary S Sundareshan said maintaining the financial health of retailers IOC, HPCL and BPCL, who currently incur a Rs 190 crore-loss per day on sale of petrol, diesel, LPG and kerosene below cost, was important to ensure supply lines don't run dry and investments are made for expansion.
Mukherjee's move to raise customs and excise duty on auto fuels in the Budget 2010-11 resulted in petrol price going up by Rs 2.71 a litre in Delhi and diesel by Rs 2.55 per litre, leaving little scope for a price hike that could cut losses.
"The challenge before us is that oil marketing companies do not suffer under-recoveries (revenue loss on fuel sales)," he said, addressing an International Symposium on Fuels and Lubricants here.
Indian Oil, Bharat Petroleum and Hindustan Petroleum lose Rs 4.97 a litre on petrol, Rs 3.27 per litre on diesel, Rs 16.91 a litre on kerosene and Rs 267.39 per LPG cylinder.
"There is a need for realistic pricing of petroleum products (so that) the companies do not suffer under- recoveries," he said. "It will be impossible for the companies to fund expansion projects (needed to meet growing demand in the country)."
