Petrol margins turn negative again

Petrol was the only petroleum product that was turning in profits for oil marketing companies.

After a short three months in the positive territory, retail margins on petrol have turned negative for oil marketing companies.

Indian Oil Corporation (IOC), the country's largest marketer of petroleum products, says it is losing 23 paisa per litre on sale of petrol. A month ago, petrol was the only petroleum product that was turning in profits for oil marketing companies.

However, under-recoveries on diesel, the most widely used transportation fuel, have come down to Rs 1.40 per litre from Rs 2 a litre last month, according to IOC. Since diesel sales (in volume terms) are four times petrol, this would somewhat balance the negative margins on petrol.

For kerosene and LPG, under-recoveries continue to be high at Rs 15 per litre and Rs 150 per cylinder, respectively.

IOC Chairman Sarthak Behuria confirmed under-recoveries on petrol. Sources say HPCL and BPCL have also been hit since all oil marketing companies work on a similar pricing formula.

The companies are already reeling under the impact of the cut in prices of petrol and diesel, announced in late November, at the behest of Congress President Sonia Gandhi.

They have also had to bear the sharp reduction in refining margins as well as the rise in crude oil prices. Global crude oil prices rose above $61 a barrel on Tuesday.

The prices have been above $60 a barrel for the last couple of weeks. Prices had fallen to $56 a barrel in November from the highs of $75 in August. This prompted the government to roll back the prices of petrol and diesel by Rs 2 and Re 1.

"We are selling petrol at a cost lower than the cost at which we procure from refineries. This will take our under-recoveries to almost Rs 60 crore per day," said a senior IOC official.

The company was losing about Rs 50 crore a day on retail sale of petroleum products a month back.