New Delhi: State-owned Indian Oil Corp. Ltd (IOC) may raise petrol prices after the assembly elections, if crude oil prices continue to hover around $115.
IOC, the country’s largest fuel retailer, is currently losing Rs 3.30 per litre on selling petrol below market prices.
“I am not linking the price increase with any event. It could be any time. If the prices remain high, we will have no recourse but to increase prices,” said chairman and managing director R.S. Butola.
Indian Oil corporation headquarters in Delhi. Photograph Ramesh Pathania
India depends on imports to meet 80% of its oil needs and is particularly vulnerable to price volatility in crude oil.
Interestingly, while the growth in petrol consumption in the country has dipped to 5.2% in the current fiscal against a yearly average of around 10%, the growth in diesel consumption has been 7% compared with a yearly average of around 5.5%.
IOC loses Rs 239 crore per day from the sale of petroleum products such as diesel, domestic liquified petroleum gas (LPG) and kerosene below market prices.
IOC also plans to renew its contract with Iran for sourcing 1.5 million tonnes (mt) of crude, said P.K. Goyal, director, finance, IOC. State-owned Hindustan Petroleum Corp. Ltd recently signed a contract with National Iranian Oil Co. (NIOC) to buy 3 mt of crude for the next fiscal. While India and Iran have worked out a way for India to pay for Iranian crude oil, resolving an issue that had threatened to halt supplies from one of the South Asian country’s key sources, the issue of withholding tax needs to be resolved.
Meanwhile, IOC on Monday said net profit in the quarter ended 31 December rose 52% to Rs 2,488 crore on higher compensation from the government towards under-recoveries.
While Rs 8,237 crore compensation was given by the government “for the previous quarters”, it was “approved and accounted for in this quarter. However, a one-time outlay of Rs 6,168 crore to pay entry tax to Uttar Pradesh offset most of the gains from higher fuel subsidy received.
Under-recoveries are the losses oil marketing companies face on account of selling fuel below cost at state-mandated prices.
The refiner posted an under-recovery of Rs 17,692 crore in the third quarter from having to sell diesel, kerosene and domestic LPG cylinders below cost to keep inflationary pressures under check. Sales rose 26.8% to Rs 1,04,064 crore. IOC had total borrowings of Rs 78,696 crore on 31 December compared with Rs 52,374 crore on 31 March.
The gross refining margin, the difference between the total value of petroleum products sold and the price of crude, dipped to $4.31 per barrel from $5.88 per barrel. IOC had announced its worst quarterly results in the second quarter of this fiscal due to unmet under-recoveries.
PTI contributed to this story.