State-owned oil companies led by Indian Oil Corporation (IOC) said on Thursday that they would have ended up with losses (under-recoveries) on petrol sales alone amounting to as much as Rs. 11,500 crore in 2012-13, were it not for the price hike they effected this week.
They justified Wednesday's steep Rs. 7.54-a-litre hike in petrol prices saying the decision to raise the l prices was a tough one but they had no other option to tackle the impact of rising crude prices compounded by a sharp depreciation in the rupee. With the hike, IOC, BPCL and HPCL have been able to recover Rs. 9,200 crore of the estimated losses on petrol but are still left with an unmet Rs. 2,331 crore in under-recoveries.
"The petrol price hike was necessary as we had exhausted all options and were losing Rs. 50 crore every day for keeping the prices low," IOC's CMD RS Butola told a news conference here on Thursday.
"We have already lost Rs. 2,400 crore in the first 50 days of the current financial year. We are also sad to pass on the burden to our consumers, but we had no option," Butola added.
He said state-owned oil firms had in the fiscal ending March 31, 2012, lost close to Rs. 4,900 crore on petrol sales.
The petrol price hike by R7.54 a litre on Wednesday is the steepest ever hike in the last 10 years, the previous steep hike being R5 a litre each on May 15, 2011 and May 24, 2011.
The average price of crude oil that India imports---which was $85 a barrel in 2010-11, increased to $111 a barrel in 2011-12. Any increase in international crude oil prices by $1 per barrel increases under-recoveries (profits foregone) of oil marketing companies on three sensitive petroleum products by around Rs. 3,745 crore.
"We got a letter two days ago from the government saying we will not be compensated for petrol under recoveries. We are to receive compensation only for diesel and LPG. Due to this we decided to raise prices," Butola said.
When asked if diesel prices would be raised soon Butola said the oil marketing companies could only change prices of de-regulated products such as petrol and ATF.
"Decisions on the price of diesel would need to be taken by the government," he said.
Butola stressed that the decision of the hike was 'unfortunate', but there was no choice.