The government is expected to decide on raising the prices of petrol and diesel early next month. Petroleum minister Murli Deora is in London for a roadshow on seventh round of bids under New Exploration Licensing Policy and is expected to return to the Capital after the Republic Day.
The delay in revising the retail prices of petrol and diesel inspite of Indian crude oil basket hovering at $ 84.41 per barrel has added to the woes of the state-owned oil marketing companies, which are facing revenue loss of Rs. 340 crore a day. The retail prices of petrol and diesel were last revised in February 2007 taking the average crude oil price at $ 55 per barrel.
The petroleum ministry, in its presentation to the Group of Ministers headed by external affairs minister Pranab Mukherjee, has pointed out that the oil marketing companies (OMCs) had been posting profit for the past three years largely on account of support from oil bonds and upstream discounts and sale of shares.
The combined net profit of Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and IBP in 2005-06 were to the tune of Rs. 5,625 crore, while support from oil bonds and upstream companies is estimated to be the tune of Rs. 25,939 crore.
IOC, which made bulk of the profit at Rs. 4,915 crore, achieved this by selling 20 per cent of Oil and Natural Gas Corporation (ONGC) shares held by it at a profit of Rs. 3224.78 crore.
The OMCs posted a net profit of Rs. 10,876 crore in 2006-07 on the back of oil bonds and upstream subsidy of Rs. 47,853 crore. Similarly, between April and September 2007, the OMCs reported a net profit of Rs. 7,283 crore on account of upstream discount of Rs. 768 crore and Rs. 11,257 crore.
“Continued cash losses make PSU operations unviable, sapping the ability to service consumers…. OMCs are heading for liquidity crisis and borrowings have increased rapidly,” according to the presentation made to the GoM.
The combined borrowings of OMCs have risen from Rs. 16,569 crore in March 2004 to Rs. 52,250 crore in December 2007.
The petroleum ministry has cautioned that with huge revenue loss investments in refineries, green fuel projects, marketing terminals and in exploration and production will be jeopardised.