With the benchmark Indian basket of crude oil averaging 10 per cent higher at $76.58 a barrel against last year’s $69.76, the revenue loss for oil marketing companies (OMCs) is set to increase.
However, an appreciating rupee has provided the cushion for the time being. The ministry of petroleum and natural gas has already revised the estimated loss on sale of auto and cooking fuel upwards and expects the figure to rise further.
Senior officials told Business Standard the estimated underrecoveries for the current year has been revised by about Rs 1,000 crore (to Rs 54,000 crore) from Rs 53,000 crore estimated at the time of petrol deregulation in June and Rs 46,000 crore in 2009-10.
Though the average crude oil price was estimated at $75 a barrel in June and the current average is only marginally higher, the Indian basket is above $80 since the beginning of this month compared to about $75 in the quarter ending September 31.
Companies fear the uptrend in price could add to loss incurred in selling diesel, LPG and kerosene below the market price. These losses, termed as underrecovery, have risen to Rs 1.79 a litre for diesel in the current fortnight from Rs 1.75 in the previous fortnight. For kerosene, it has increased to Rs 15 from Rs 14.83 a litre last month and Rs 188 a cylinder for LPG from Rs 158 in September.
Some relief to OMCs has come with the rupee appreciating by Rs 1.36 a dollar against last financial year’s average of Rs 47.42. Every rupee gain reduces the oil import bill by about Rs 5,200 crore annually since oil companies have to spend a smaller amount to import a barrel of crude oil. Besides, the appreciating rupee helps in reducing the interest burden on foreign currency loan “We have gained 3-4 per cent on negative interest,” said an OMC executive.
He said a clearer picture would emerge only after the second quarter results were finalised in the second half of October. The government budget for 2010-11 has so far provided only Rs 17,108 crore for petroleum subsidy, of which only Rs 3,108 crore is for meeting underrecoveries of the current year.
The government had asked upstream oil and gas producing companies – ONGC, GAIL India and Oil India Ltd – to shell out Rs 6,500 crore as part of the subsidy sharing mechanism for the April-June period.
The basis for calculation of underrecoveries was on the trade parity formula devised by the Rangarajan committee. Though petrol has been decontrolled on June 25, it would not make much of an impact as far as reducing the underrecoveries is concerned, since it constitutes about 8-10 per cent of the total underrecovery. The major chunk of underrecovery in excess of Rs 20,700 crore is estimated to come from the sale of LPG, followed by kerosene at Rs 16,500 crore and diesel at Rs 14,000 crore.
The underrecovery for the first quarter was around Rs 20,000 crore and the ministry of petroleum and natural gas has sought Rs 13,500 crore from the government budget. The three oil marketing companies – Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation – have already accounted for the remaining Rs 14,000 crore, which was provided in the first supplementary to the budget, as accruals in accounts for 2009-10.
“We are sure that the government will try to subsidise the OMCs for underrecovery. The crude oil price will continue to range between $75-80 a barrel,” said G C Daga, director (marketing), IndianOil.
