Fearing a credit ratings downgrade on account of difficult cash flows, state-run oil companies are anxiously waiting for a comfort letter from the finance ministry on the release of fuel subsidy payments for the first six months of 2012-13, expected to total between Rs. 50,000 and Rs. 55,000 crore.
The petroleum ministry spoke up for Indian Oil (IOC), Bharat Petroleum (BP) and Hindustan Petroleum (HP), which sell diesel, cooking gas and kerosene at a loss, as the clock ticked away for their second quarter results, expected on Friday.
“I have had discussions with the finance ministry and the subsidy letter is in process,” petroleum and natural gas minister Veerappa Moily said."I have been assured that the letter will be released in a day or two, before the second quarter results of these companies," he added.
The three oil companies—IOC, HPCL and BPCL — are currently losing Rs. 9.82 per litre on diesel, Rs. 33.93 a litre on kerosene and Rs. 468.50 per LPG cylinder. These figures will drag down their financial results.
The finance ministry has not released any subsidy support to the oil companies for the losses incurred by them on selling fuel below cost in this fiscal. Upstream companies Oil and Natural Gas Corporation, Oil India Ltd and GAIL Ltd share a part of the revenues which the oil retailers lose on selling diesel, LPG and kerosene at government-controlled rates.
In the first quarter of current year, upstream firms made good Rs. 15,061 crore out of the Rs. 47,811 crore retailers lose on sale of diesel, cooking gas and kerosene.
In the second quarter, the fuel retailers lost Rs. 42,200 crore in revenue. Of this, upstream contribution would be in the range of Rs. 14,000-15,000 crore and rest would have to come from the Finance Ministry.
State-owned fuel retailers are likely to end the fiscal with a revenue loss of over Rs. 1,63,000 crore. Of this, about Rs. 60,000 crore will come from upstream companies Oil and Natural Gas Corp (ONGC), Oil India Ltd and GAIL India.