Profit drain

New Delhi, July 5: Indian Oil, Hindustan Petroleum and Bharat Petroleum are likely to plunge into the red during the first quarter of the current financial year.

While the standalone refineries are raking in huge margins, the marketing companies have to sell LPG and kerosene at subsidised prices. The long delay on the part of the government in allowing the oil companies to increase petrol and diesel prices, coupled with high taxes on petroleum products, has led to higher losses.

According to oil industry estimates, given the prevailing tax and price structures, IOC may end the April-June quarter with a net loss of Rs 1,800 crore. BPCL may take a knock of Rs 1,300 crore and HPCL of Rs 1,050 crore. IBP may end up with a lower loss of Rs 400 crore.

However, a third of the losses will be reimbursed by ONGC and Gail as part of the government’s policy on sharing the subsidy burden for LPG and kerosene.

The petroleum ministry also wants stand-alone refineries such as Reliance and MRPL to share part of the burden on LPG and kerosene as the public sector oil companies are losing Rs 130 per cylinder on cooking gas and Rs 11 per litre on kerosene.

The 50 paise per litre cess on diesel and petrol for the road fund and the increase in excise duties on petrol and diesel introduced in the budget has not been passed on to consumers. This has led to an additional drain of Rs 2 to 3 per litre for the oil firms.

While the petroleum ministry has been demanding that these levies be rolled back, the finance ministry has refused to budge on the issue.

Serious differences have surfaced between Indian Oil and Reliance Industries over supplies of kerosene and LPG that the public sector company has to pick up from the Jamnagar refinery.

IOC has complained to the petroleum ministry that Reliance is not supplying adequate quantities of kerosene, as a result of which it is becoming difficult to fulfil the needs of the public distribution system.

Reliance also wants to slash supplies of LPG to public sector companies. The private company is keen to export these two fuels as it can get a better price in the international market.

However, the public sector oil firms are forced to go in for extra imports of the two products. As a result of this, their losses mount further. While all stand-alone refineries in the public sector such as MRPL and the Chennai refinery have fallen in line, Reliance tends to set its own pace.

Kerosene also has to be purchased from the international market at much higher prices. This increases the financial drain on public sector companies.