Search This Blog

under recoveries and petrol price hike  

The Government has been blaming oil companies for increasing petrol prices as it is the only oil product that is deregulated. But how true is its claim that not raising prices will bleed these companies to death? Every time petrol prices are raised the nation goes through a wave of protests. Indian Oil Corporation, a Navratana company with an annual income of Rs 313000 crore, in the first three months of this financial year has posted a loss of Rs 30700 crore. Another oil major HPCL witnessed a loss of Rs 3300 crore. BPCL's loss was Rs 3200 crore.
Oil analysts say it's wrong to say the companies are making losses, it's about who will foot the subsidy, the government or the oil companies. "As is perceived generally in the market its not that these companies are making losses, neither are they saying so. It is that they are incurring under recoveries and theses under recoveries can be made up by either consumers paying for it or the government putting in that money in the form of subsidy. Government is committed to paying that subsidy to oil companies but it appears it's a timing problem," Associate Director Oil & Gas, PwC Deepak Mahurkar said.
Petrol is not the only culprit. Under-recoveries of oil companies have shot up by 75 per cent. Money is actually lost while selling diesel, LPG and kerosene. Currently oil companies are suffering an under-recovery of Rs 8.58 per litre on diesel, Rs 26.48 on kerosene and Rs 260 per cylinder on LPG. "Initially government's intention was to deregulate complete oil sector but because of political pressure they could not do so. Diesel is the big boy of the whole basket and also a politically sensitive item, so government could not muster guts to deregulate it, result today is petrol user is suffering," Oil Analyst Narendra Taneja said. It is at the retail level that oil companies start losing money as government takes away about Rs 30 on every litre of petrol. But that money is needed to fuel ambitious social sector spending. Raising kerosene, diesel and LPG prices will be politically suicidal so for now the middle class will have to pay more for petrol and oil companies will feel squeezed.

AddThis Social Bookmark Button


Post a Comment