IOC losing Rs79 cr per day on selling fuel below cost

IOC losing Rs79 cr per day on selling fuel below cost

New Delhi: State-run Indian Oil Corp (IOC), the nation’s largest fuel retailer, is losing about Rs79 crore per day on selling auto and cooking fuel below cost.

“International oil prices have softened a bit, resulting in a marginal reduction in our under-recoveries on petrol, diesel, domestic LPG and kerosene," an IOC official said.

IOC and sister PSUs - HPCL and BPCL, who have been barred by the government from revising fuel prices to keep inflation under check, calculate the desired selling price for petrol and diesel on 1st and 16th of every month based on the previous fortnight’s average global oil price.

The three firms currently lose Rs3.63 per litre on petrol and Rs2.33 a litre on diesel. These are lower than Rs4.69 per litre loss on petrol and Rs3.09 a litre on diesel they suffered in the first fortnight of September.

“IOC lost Rs90 crore per day on fuel sales in the first fortnight of September. This has come down to Rs79 crore a day from today," the official said.

On domestic LPG and kerosene, the desired price of which is calculated on a monthly basis, the three firms make a loss of Rs158.55 per 14.2-kg LPG cylinder and Rs17.15 on every litre of kerosene sold.

“At current oil prices, IOC will end the fiscal with a revenue loss of Rs23,510 crore and the industry (IOC plus BPCL and HPCL) will see a revenue loss of Rs41,440 crore," he said.

The basket of crude oil India buys from overseas markets averaged $68.07 per barrel in September as against the August average of $71.98 a barrel.

Petroleum secretary R.S. Pandey had last week stated that the government will compensate under-recovery or revenue loss on sale of domestic LPG and kerosene through issue of oil bonds.

At current prices, the revenue loss on kerosene would be Rs17,000 crore while that on LPG would be another Rs12,000 to Rs13,000 crore. These will be met through issue of bonds.

The Rs10,000 to 11,000 crore under-recovery on petrol and diesel would be partly met by upstream firms like ONGC by way of discounts on crude oil and LPG they sell to the three retailers.

“Oil marketing companies (IOC, BPCL and HPCL) may have to bear a part of the under-recovery on auto fuels," Pandey had stated.

Of the Rs103,292 crore revenue loss on fuel sales in 2008-09 fiscal, 68% was met by the government through issue of oil bonds. Upstream firms ONGC bore Rs28,225 crore, GAIL India Rs1,781.2 crore and Oil India Ltd Rs2,936.7 crore.