Oil Minister S Jaipal Reddy on Friday took up the issue of rising losses of oil marketing companies with Finance Minister Pranab Mukherjee. Mukherjee heads an empowered group of ministers (EGoM), which is to review price of three regulated petroleum products — diesel, kerosene and domestic LPG — that together are causing a daily loss of Rs 450 crore to the government-owned oil companies — Indian Oil, Hindustan Petroleum and Bharat Petroleum.
Reddy met Mukherjee to apprise him of the precarious financial state of the public sector oil firms that are sitting on high borrowings due to a lag in release of government compensation and revision in fuel prices.
“I am concerned about the increasing under-recoveries (revenue losses) of oil marketing companies (OMCs). Everyday, OMCs are incurring under-recoveries of about Rs 450 crore,” Reddy told reporters after the meeting.
The EGoM was first supposed to meet on May 11 after the Assembly elections in West Bengal came to an end. However, it got deferred. A second meeting was slated for June 9 but it did not take place. Reddy said no new date has been decided for the group’s meeting.
The OMCs that purchase crude oil at market rates, are required to sell diesel, kerosene and liquefied petroleum gas (LPG) at government-subsidised prices, resulting in losses.
The companies incur an under-recovery or revenue loss of Rs 12.64 on every litre of diesel, Rs 26.16 on every litre of kerosene and Rs 381 for every LPG cylinder. Diesel price has not been raised since June 26 last year. At these rates, the OMCs could end up the current financial year with an all-time high loss of Rs 165,000 crore.
Oil ministry has made a case for increase in prices of all the three controlled products.
The oil companies are apprehensive that prices won’t be increased once the monsoon session of Parliament begins in mid-July.
The last increase in prices of these three products was taken in June last year when crude was ruling around $72 per barrel. Crude oil has averaged $110 barrel this month. In June 2010, diesel price was increased by Rs 2 per litre, kerosene by Rs 3 per litre and LPG by Rs 35.
