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IOC posts mega loss, warns of shortages

business Updated: May 29, 2008 11:40 IST
HT Correspondent

No more petrol or diesel? We haven’t got there yet, but the nightmare may well come true, if Indian Oil chairman Sarthak Behuria is to be believed.

State-run oil retailers will run out of money to pay for crude imports in the next few months unless the government raises prices of petrol and diesel. On Wednesday, Indian Oil Corporation, the biggest of the firms, warned of fuel shortages countrywide.

At a news conference called to announce IOC’s dismal quarterly results — a net loss of Rs 414 crore in the January-March period — Behuria said he hoped the government would not allow the country to slide into the “horrendous” days of the oil crises of the 1970s and 1980s.

Given their finances, oil retailers can meet a 10-15% growth in demand, but fuel consumption is rising faster, Behuria said. “The market will feel the pinch of not having enough diesel and petrol.” IOC has no option but to ration sales, he added.

Public sector oil companies IOC, HPCL and BPCL are losing hundreds of crores of rupees every day selling petrol, diesel, kerosene and LPG at subsidized rates set by the government, even as global crude prices have rocketed above $135 per barrel.

The companies have appealed for price hikes and duty cuts, but a poll-bound and inflation-wary government has dithered. As a result, the companies have seen rapid erosion of their bottomlines in recent quarters. So much so, IOC won’t have money to buy crude beyond September, Behuria said. HPCL and BPCL, he said, could face a crunch even earlier. An HPCL official told HT the crisis could come as early as July.

Prime Minister Manmohan Singh, Finance Minister P. Chidambaram and Petroleum Minister Murli Deora met several times over the past week, including on Wednesday, but no decision to raise prices has been reached. Still, a hike appears imminent. The assembly and Lok Sabha polls are likely, though, to ensure the hike is much less than what would be comfortable for the oil firms.