Oil PSUs may post loss of 121,000 cr on fuel sales in FY12

Oil PSUs may post loss of 121,000 cr on fuel sales in FY12

New Delhi: State fuel retailers may post a whopping 121,000 crore revenue loss on selling diesel, domestic LPG and kerosene at government-controlled rates this fiscal, oil minister S Jaipal Reddy said Friday.

The revenue loss, termed as under-recovery in oil company parlance, is despite the recent steep hike in diesel prices by 3 per litre, kerosene by 2 a litre and LPG rates by 50 per cylinder, besides a reduction in customs and excise duties.

“Even after these measures, the oil marketing companies (OMCs) are currently suffering under-recoveries to the tune of 235 crore per day and are expected to incur an under-recovery of over 121,000 crore during 2011-12," Reddy said at a meeting of the parliamentary consultative committee on petroleum and natural gas.

Before the price hike and reduction in customs duty on crude to zero from 5% and excise duty on diesel being slashed by 2.60 per litre, state-owned oil firms were projected to lose 171,000 crore in revenues during the current fiscal.

Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum currently lose 4.97 per litre of diesel, 23.74 per litre of PDS kerosene and 247 per cylinder of domestic LPG.

“Besides absorbing an annual estimated revenue loss of 49,000 crore on account of duty reductions, the government will also be required to compensate a large portion of these ( 121,000 crore) remaining under-recoveries," Reddy said.

The losses on fuel sales have had a significant adverse impact on the financial health of oil PSUs, with diminishing cash flows and reduced resource generation for capacity expansion and modernisation.

“The OMCs are forced to borrow heavily from the market even for their working capital requirement, which is leading to mounting interest burden on them," he said.

In order to insulate the common man from the impact of the rise in oil prices in the international market and in view of domestic inflationary conditions, the government continues to modulate the retail selling price of diesel, PDS kerosene and domestic LPG.

The current sale price of these retail fuels in Delhi — 41.29 per litre of diesel, 395.35 per 14.2-kg LPG cylinder and 14.83 per litre of kerosene — is way below the imported cost of the fuel.

“At these rates, the OMCs are incurring a daily under- recovery (revenue loss) of 235 crore," he said.

Petrol prices have risen by 21% since they were freed from government control in June last year. The price of petrol in Delhi was 51.43 a litre when the government decontrolled the fuel on June 26, 2010. Today, it costs 63.70 a litre.

Reddy said the average price of the basket of crude oil India buys was $69.76 per barrel in 2009-10, which increased to $85.09 per barrel in 2010-11.

In 2011-12, the average price of the Indian basket of crude oil is hovering around $112 per barrel, he said.

Over 40% of the 63.70 a litre price of petrol in Delhi is made up of taxes — 0.69 in customs duty, 14.78 in excise and 10.62 in state VAT.

However, in the case of diesel, the total taxes account only for 7.64 out the retail price of 33.65 in Delhi. The taxes include 0.74 in customs duty, 2.06 in excise duty and 4.84 state VAT.