Indian Oil Corp (IOC) and other state-run fuel retailers have piled up inventory loss of over Rs.10,000 crore which together with depreciating rupee has severely strained their finances ahead of a revision in petrol and diesel prices.
IOC along with Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) were to decide on revising petrol and diesel prices on Wednesday, amidst clamour for a rate cut on falling crude oil prices.
The firms, however, rue that petrol and diesel prices are not set based on trends in crude oil prices.
They are benchmarked against internationally-traded rates of gasoline (for petrol) and gas oil (for diesel) as well as rupee-dollar exchange rate.
Industry sources said rupee had depreciated against the U.S. dollar since the last revision on December 16, making imports costlier.
Rupee had averaged Rs.63.46 to a dollar since then as against Rs.61.95 factored in the last price cut.
On top of this, margins, which is differential between raw material (crude oil price) and product rate, had halved to $8-9 per barrel, they said.
While the slump in international crude oil prices had resulted in successive cuts in petrol and diesel prices, for oil companies they had meant inventory losses as they would typically buy crude at one rate but by the time it was processed and marketed its market value would have come down.
In April-September, the three state oil firms had an inventory loss of Rs.5,300 crore which had risen by ‘two to three times’ since then, a top source said.
Oil firms feel people should look at the complete picture and not just base their expectations for a cut in retail prices on crude oil rates alone.
A cut in prices as per the fortnightly practice of revising rates on 1st and 16th of every month, could be announced on Wednesday only at the expense of oil companies, they said.
Petrol and diesel prices were last cut on December 16 by Rs.2 per litre each. This was the eighth straight reduction in petrol prices since August, and fourth in diesel since October.
Petrol in Delhi costs Rs.61.33 a litre, the lowest in 44 months. Diesel costs Rs.50.51 a litre, the lowest since July 2013.
Since August, petrol price have been cut by Rs.12.27 per litre on a cumulative basis while diesel rates in four downward revisions was slashed by Rs.8.46 a litre.
The price cuts would have been steeper but for the government deciding to make hay out of the crude oil rate slump to around $60 per barrel. It raised excise duty on petrol by Rs.3.75 and by Rs.2.50 a litre on diesel to mop up Rs.10,600 crore.
Crude oil price in June was $115 per barrel.
Published - December 31, 2014 12:25 am IST
