New Delhi: State-run oil companies are expected to rack up revenue losses of Rs 1.3 trillion ($26.4 billion) in the fiscal year ending March 2012, making it difficult for them to borrow from banks, oil minister S. Jaipal Reddy said on Wednesday.
Reddy said he hoped a ministerial panel to review prices of fuel sold at subsidized rates will convene before the next parliament session that is likely to begin on 22 November, and added that oil firms are free to fix prices of petrol.
“We should not overestimate financial capacity of our oil companies. Our oil companies will find it difficult to get loans from the Indian banks and later foreign banks,” Reddy told reporters on Wednesday.
The combined debt of state-run oil retailers - Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum - rose 23% since March to Rs 1.19 trillion ($24.31 billion) in August.
On Tuesday, state-run Hindustan Petroleum Corp Ltd (HPCL) said it was considering raising petrol prices within the next two weeks to cut down on retailing losses.
The oil refining and marketing firm posted a quarterly loss of Rs 33.6 billion ($548.4 million). Last week, its fellow state oil product seller Bharat Petroleum Corp Ltd (BPCL) posted a loss of Rs 32.3 billion.
India freed petrol prices in June 2010, but still subsidizes diesel, which accounts for about 70% of all petroleum products used in the country. Prices for diesel, kerosene and liquefied natural gas (LNG) are regulated by the government in India, forcing oil firms to sell at losses. The costs of these price caps have climbed as international oil prices have risen.
Reddy said he has asked for the ministerial panel to take a comprehensive view on the oil sector, but said increasing prices was a difficult decision.
“To take a decision on diesel, kerosene and LPG is not an easy affair. We will ask for review of prices but how much any democratic government can take harsh decisions,” he said.
India’s inflation barely budged in September, staying above 9% for the tenth straight month, driven by a jump in fuel and power prices.
India needs to raise controlled prices for diesel to cut oil firms’ revenue losses on retail sales, adding such a move could happen when inflation starts moderating, the Prime Minister’s economic adviser C. Rangarajan had said last month.
State-run oil companies have asked the finance ministry for an additional Rs 280 billion cash compensation to partly compensate retailers for revenue losses on fuel sold at subsidized rates in April to September, oil secretary G. C. Chaturvedi separately told reporters.
The finance ministry has agreed to pay cash compensation of Rs 150 billion to oil companies for the April-June quarter losses, although the amount is yet to be released.