Oil firms to sell only costlier branded fuel in select cities

Oil firms to sell only costlier branded fuel in select cities
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First Published: Mon, May 19 2008. 03 39 PM IST
Updated: Mon, May 19 2008. 03 39 PM IST
New Delhi: State-run oil firms have begun selling only the costlier branded petrol and diesel at most of their petrol stations in big cities, even as pump owners have threatened to go on indefinite strike against the move.
Indian Oil, Bharat Petroleum and Hindustan Petroleum are selling only their respective branded fuels like ‘Premium’, ‘Speed’ and ‘Power’ at two-third of petrol pumps in 17-18 cities, including the National Capital Region, Mumbai, Kolkata, Bangalore and Pune.
Branded petrol costs Rs3-4 a litre more than the normal or unbranded petrol, while branded diesel is priced at Rs1.25-2 more than normal diesel.
“Oil companies are leaving no choice with consumers. They will be forced to buy expensive fuel,” said Ajay Bansal, general secretary, Federation of All India Petroleum Traders FAIPT), a body that claims to represent 37,000 petrol pumps.
“Naturally, we oppose such a move. They did not consult us before taking such a drastic step. FAIPT’s general body is meeting in Pune on 24 May and an indefinite strike will be declared (against the move),” he said.
The move, which came on top of oil marketing companies’ decision to stop issuing new LPG connections and fix quota per family for existing domestic cooking gas, appears to be prompted by the huge Rs2,00,000 crore projected revenue loss on sale of petrol, diesel, LPG and kerosene this fiscal.
IOC, BPCL and HPCL are losing over Rs550 crore a day on fuel sales, as the government has not allowed them to raise prices despite crude prices more than doubling since February.
FAIPT is seeking five per cent commission on retail sale price of petrol and diesel as against the present practice of a fixed commission.
IOC, BPCL and HPCL currently lose Rs16.34 a litre on petrol, Rs23.49 per litre on diesel, Rs305.90 per LPG cylinder and Rs28.72 a litre on kerosene.
The three firms are faced with a huge liquidity crunch and are borrowing Rs3,500 crore a month to meet day-to-day expenditure. Borrowings of the three firms have reached Rs65,000 crore, said an IOC official.
The government’s bar on oil firms from raising fuel prices despite crude costs doubling to over $120 a barrel, is likely to see the three firms end the current year with a revenue loss of Rs2,00,000 crore. Last year, the loss was Rs77,304.50 crore.
Stopping issuance of new LPG connections would help limit the Rs305.90 a cylinder loss. Besides, quota per family would be fixed and expansion of retail network put on hold. Other measures include stopping import of fuels like diesel, for which high international prices have to be paid.
Though the nation is short in LPG and diesel production this year, the companies have suggested managing demand within the existing production.
Sources said the government’s current compensation mechanism was grossly inadequate and the companies were facing problems even in meeting their day-to-day expenses.
Government makes up for 42.7% of the under realisation of oil companies on fuel sales through issuance of oil bonds, while 33% of the losses is compensated by companies such as ONGC and GAIL.
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First Published: Mon, May 19 2008. 03 39 PM IST