The Hindu : Business : Oil companies' losses mount since April

Online edition of India's National Newspaper
Wednesday, May 11, 2005

Business

Business

Oil companies' losses mount since April

Special Correspondent

Under-recoveries would affect oil companies' performance

NEW DELHI: The under-recoveries of oil companies on sales of petroleum products owing to high international crude oil prices and increase in duties have reached Rs. 5,800 crores since April 1. Disclosing this here on Tuesday, the Indian Oil Corporation Chairman, Sarthak Behuria, said petrol and diesel prices needed to be raised to compensate for the losses.

He said the under-recoveries of IOC, Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) on diesel sales were estimated at Rs. 2,560 crores and on petrol at Rs. 569 crores. Seeking an increase in prices of these products, he said petrol prices needed to be raised by Rs. 4.59 and that of diesel by Rs. 4.97 a litre. Of this increase, Rs. 2.52 was due to the hike in excise duty on petrol and Rs. 1.53 to the increased duty on diesel.

Addressing a Petrofed seminar, he said the total under recoveries on petrol, diesel, LPG and kerosene for 2004-05 were estimated at Rs. 20,310 crores. For the first six weeks since the beginning of the current fiscal, the losses were estimated at Rs. 5,860 crores. Warning that the growing under-recoveries would affect the financial performance of the oil companies, he said IOC's outstanding had risen by 75 per cent to Rs. 18,000 crores in the past one year as the company had borrowed money to meet its working capital requirement.

He stressed the need for oil companies to step up investments in the risky business of discovering and production of oil while setting up new capacities for massive supply chain infrastructure to meet the country's ambitious growth plans. He warned that any slowdown in activities of the oil companies due to unfavourable prices would result in damaging the goal of economic development.

Deepankar Mukherjee of the CPM urged that consumers should be insulated from the increase in oil prices by getting the Finance Ministry roll back the excise duty hike on petrol and diesel.

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