Oil price increases Rs 1.82/L cost

State-owned oil companies are considering a Rs 1.82 per litre hike in petrol prices, as a fall in rupee has increased the cost of imports of the raw material (crude oil).
    
Indian Oil, Hindustan Petroleum and Bharat Petroleum last hiked petrol prices by Rs 3.14 a litre on September 16 when the rupee was ruling at about 48 to a US dollar. The local currency has depreciated further and is now trading at over 49 against the American currency.
    
"From today, there are some losses on petrol. To cover them, we may have to increase prices," HPCL Director (Finance) B Mukherjee told reporters here.
    
He said crude oil is hovering at around USD 108 per barrel in international markets. At current exchange rate, petrol price of Rs 66.84 per litre in Delhi corresponds to about USD 102 per barrel equivalent of crude oil price.
    
The government had in June last year deregulated or freed petrol from all price controls, but the retail rates have not moved in line with cost as high inflation rate forced the oil companies to seek 'advice' from parent oil ministry before revising rates.
    
Mukherjee did not say when petrol price would be hiked. "We are in consultations," he said without elaborating.
    
The loss on petrol at present is Rs 1.50 per litre and after including local levies, the desired increase in retail prices is Rs 1.82 per litre.
    
"Let's say, we are toying with the idea," he said. "It may happen. We will see".

Besides petrol, the three firms are losing Rs 333 crore per day on selling diesel, domestic LPG and kerosene below cost. They lose Rs 9.27 per litre on diesel, Rs 26.94 per litre on kerosene sold through the public distribution system (PDS) and Rs 260.50 per 14.2-kg LPG cylinder supplied to domestic households for cooking purposes.
    
At the current rate, the industry is projected to lose Rs 1,21,459 crore in revenue on sale of diesel, domestic LPG and kerosene for the full fiscal.
    
While the loss on these three products are compensated through a combination of government cash subsidy and upstream oil firm dole outs, no such mechanism exists for making good the losses on petrol as the product is deregulated.

Petrol prices may go up by Rs 3/ litre

"Oil retailers are losing Rs 2.61 per litre or Rs 15 crore per day on sale of petrol. Together with local taxes, the hike needed to level domestic rates with international prices is about Rs 3 per litre," a top government official said.

IOC, BPCL and HPCL have lost Rs 2,450 crore this fiscal on selling petrol -- whose rates were freed from government control in June last year -- below the cost.

"At current rate, oil firms will accrue another Rs 2,850 crore of loss on sale of petrol, taking the total loss on a fuel that was freed from control, to Rs 5,300 crore for the full fiscal," the official said, adding, "Oil firms will have to take a call on raising petrol price soon."
   
Besides petrol, the three firms are losing Rs 263 crore per day on selling diesel, domestic LPG and kerosene below cost. Diesel is being sold at a subsidy of Rs 6.05 a litre, kerosene at Rs 23.25 per litre while domestic LPG rates are under-priced by Rs 267 per 14.2-kg cylinder.

"The industry lost around Rs 65,000 crore in the first half of the current fiscal on the three products and for the full year the revenue loss is estimated at Rs 121,571 crore at the price of Indian basket at USD 110 per barrel," said the official.
   
Rupee fell to 48 per dollar today for the first time since September 2009. "Every rupee depreciation, the under-recovery (revenue loss) increases annually by around Rs 9,000 crore," he said, underscoring the need for action on the price front on all the three products.

Indian Oil (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) had last raised petrol price by Rs 5 a litre in May. Diesel, domestic LPG and kerosene price were hiked in June by Rs 3 per litre, Rs 50 per cylinder and Rs 2 per litre.

The government had in June last year decontrolled petrol price but continues to dictate diesel, domestic LPG and kerosene rates. However, petrol price has not moved in tandem with its cost, keeping in mind the government's concerns on inflation which climbed to 9.78 percent in August.

"The losses on the four products have meant that oil companies borrowed to meet even their working capital requirement," the official said.
   
The combined borrowing levels of the oil marketing companies has increased from Rs 96,700 crore in March 2011 to Rs 120,000 crore in August 2011. "The increase is mostly towards short term borrowings to fund working capital requirements," he said.

The basket of crude oil that India buys had averaged USD 85.09 per barrel in 2010-11. From April-September, it has averaged USD 111.64 per barrel, a 31 percent increase over the last fiscal (2010-11).

The Indian basket of crude oil averaged USD 106.94 per barrel in August and USD 110.88 a barrel in September.
"Due to hardening of crude/petroleum product prices in the international market and depreciation of rupee viz-a-viz dollar, the under-recoveries of oil marketing companies have been increasing during 2011-12," the official added.