Cash-strapped oil companies on Monday announced a hefty increase in security money that consumers deposit at the time of taking new cooking gas connections.
The increase from Rs 950 to Rs 1,400 per cylinder (inclusive of charges for the regulator)— up almost 50 per cent -— came as state-run oil marketing companies are groping to find ways to tide over a sharp spike in global crude prices and minimise losses arising from subsidised sale of fuel and gas.
However, officials at Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited attributed the increase to rise in input costs, especially steel prices, that have gone up by 35 to 40 per cent since January this year.
Security deposits for cylinder and regulator were last increased in January 2005.
“We are left with little choice but to hike the security deposit as steel, which is the basic raw material for a cylinder and also a regulator have gone by nearly 40 per cent," said an IOC official told the Hindustan Times on condition of anonymity. "The oil companies are already burdened by huge subsidy bill so the hike (in security deposit) was inevitable."
Oil companies have been hit hard by rising crude prices, which touched an all time high of $135 a barrel last week. Fearing political backlash in an election year, the government hasn't allowed them to increase prices of petrol and diesel in line with international prices.
As a result, under recoveries at oil companies could cross Rs 200,000 crore in the current fiscal year, if prices remain at current levels. The under recoveries not only threaten to push the oil companies into losses, but significantly hamper their investment plans.
Petrol is currently being sold at a loss of Rs 16.34 a litre and diesel at Rs 23.49 per litre.
Pressure is mounting on the government to increase petrol and diesel prices. A decision is expected soon, but it will unlikely include any change in prices of cooking gas and kerosene, which are also sold at highly subsidised rates.