The Telegraph
Tuesday , October 18 , 2011
Since 1st March, 1999
CIMA Gallary
Email This Page
Weak rupee hurts oil retailers

New Delhi, Oct.17: State-owned oil firms lost Rs 21,374 crore in the second quarter of this fiscal for selling kerosene, diesel and domestic LPG cylinders below cost.

“The oil marketing companies are incurring a daily revenue loss of about Rs 272 crore on sales of diesel, kerosene and domestic LPG cylinder,” officials said.

The loss stands at Rs 7.06 per litre of diesel, Rs 25.90 per litre of kerosene and Rs 270.50 per LPG cylinder.

In petrol, the firms are losing another 33 paise per litre. Prices of petrol, which is decontrolled, were hiked by Rs 3.27 per litre last month after global crude prices spiked and the rupee touched a two-year low against the dollar, increasing the cost of oil imports.

During the six months of this fiscal, the three oil firms Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation have lost Rs 64,900 crore, officials said.

In the first three months April to June the loss was Rs 43,526 crore; in the next three months July to September the loss was Rs 21,374 crore.

In June, the price of diesel was hiked by Rs 3 a litre, while domestic LPG got dearer by Rs 50 per cylinder and kerosene cost Rs 2 more per litre. The hike was expected to reduce the losses of oil companies by Rs 21,000 crore during this fiscal. Also, the government reduced customs and excise duties on petroleum products, which would result in a revenue loss of Rs 49,000 crore this fiscal.

However, the unexpected fall in the rupee against the dollar eroded part of the recovery. For every rupee depreciation, the under-recovery increases by around Rs 9,000 crore, the officials said.

The rupee has depreciated to Rs 48.9 to a dollar from Rs 44.60 in March, increasing the cost of importing crude. The country imports 80 per cent of its crude requirements.

Upstream oil firms bore roughly one-third of the Rs 43,526-crore revenue loss on fuel sales in the first three months. The government agreed to give about Rs 15,000 crore as subsidy, and the rest was absorbed by the retailers.

Of the Rs 14,508.83 crore provided by upstream firms, ONGC gave Rs 12,046.26 crore, Oil India Rs 1,780.65 crore and GAIL (India) Rs 681.92 crore. However, no subsidy sharing mechanism has been decided for the second quarter.

In the April-September period, the retailers lost Rs 37,719 crore on diesel, Rs 13,361 crore on kerosene and Rs 13,820 crore on domestic LPG.

The approach paper to the Twelfth Plan, which is expected to be placed before the National Development Council, said rational energy pricing was critical for effective demand management and a healthy supply response.

“The 12th Plan must address the challenge of aligning domestic energy prices with the global price trends,” the approach paper said.

Email This Page