Oil marketing companies IOC, HPCL and BPCL have suffered a loss of Rs. 40,000 crore in the first quarter of this fiscal on account of selling subsidised fuel, but the second quarter looks better with the losses projected to come down to half that figure, thanks to the retail price revision, tax cuts and a moderating crude price.
According to sources in fuel retailing companies, their losses from selling fuel below cost have now softened to Rs. 220 crore a day compared to twice that amount in the previous quarter.
The Indian basket of crude, which scaled $121.9 a barrel on April 28, has progressively softened to an average of $109 in June and to $108 in the current month, according to IOC’s international trade department.
At this rate, the total losses for fuel retailers would be in the range of Rs. 67,000 crore for the rest of the fiscal, in contrast to nearly double that amount forecast by the oil ministry at the time of price revision last month. Energy expert and senior director at Deloitte Touche Tohmatsu India, Kalpana Jain said the spurt in oil price in April was to some extent based on sentiments as there were fears of supply disruption due to geopolitical reasons. “In summer, prices usually show a softening trend compared to winter months,” Jain said.
One third of the total loss in the first quarter has been compensated for by upstream companies ONGC, Oil India and Gail India.
The government has allocated Rs. 23,000 core in the budget as its share of subsidy. This amount, will invariably have to be raised.
However, the finance ministry does not take the oil ministry’s calculation of under-recoveries (retailers’ losses from selling fuel below cost) at Rs. 1,20,000 crore for the remaining three quarters on face value. Instead, it will wait and see till October-November on how crude oil moves before allocating any extra money. Officials in North Block also do not believe that the 5% customs duty cut on crude and on finished products as well as the Rs. 2 per litre excise duty cut on diesel, will upset its fiscal deficit calculations. The duty cut means a sacrifice of an annual Rs. 49,000 crore but since it is applicable only for the remaining three quarters, the total loss will be limited to about Rs. 36,000 crore including the share of states. The central government’s share of the loss comes to roughly Rs. 25,000 crore.
Officials said that the government may have to raise oil subsidy by another Rs. 22,000 crore, for which they are confident of finding enough resources. When all ministries convey to the finance ministry their actual spending till the third quarter as part of the annual budget making exercise, North Block is confident of finding enough savings to fund any increase in oil subsidy as well as to meet the losses due to tax cuts. The finance ministry has already asked all other ministries to keep there expenses under control for this year.
According to sources in fuel retailing companies, their losses from selling fuel below cost have now softened to Rs. 220 crore a day compared to twice that amount in the previous quarter.
The Indian basket of crude, which scaled $121.9 a barrel on April 28, has progressively softened to an average of $109 in June and to $108 in the current month, according to IOC’s international trade department.
At this rate, the total losses for fuel retailers would be in the range of Rs. 67,000 crore for the rest of the fiscal, in contrast to nearly double that amount forecast by the oil ministry at the time of price revision last month. Energy expert and senior director at Deloitte Touche Tohmatsu India, Kalpana Jain said the spurt in oil price in April was to some extent based on sentiments as there were fears of supply disruption due to geopolitical reasons. “In summer, prices usually show a softening trend compared to winter months,” Jain said.
One third of the total loss in the first quarter has been compensated for by upstream companies ONGC, Oil India and Gail India.
The government has allocated Rs. 23,000 core in the budget as its share of subsidy. This amount, will invariably have to be raised.
However, the finance ministry does not take the oil ministry’s calculation of under-recoveries (retailers’ losses from selling fuel below cost) at Rs. 1,20,000 crore for the remaining three quarters on face value. Instead, it will wait and see till October-November on how crude oil moves before allocating any extra money. Officials in North Block also do not believe that the 5% customs duty cut on crude and on finished products as well as the Rs. 2 per litre excise duty cut on diesel, will upset its fiscal deficit calculations. The duty cut means a sacrifice of an annual Rs. 49,000 crore but since it is applicable only for the remaining three quarters, the total loss will be limited to about Rs. 36,000 crore including the share of states. The central government’s share of the loss comes to roughly Rs. 25,000 crore.
Officials said that the government may have to raise oil subsidy by another Rs. 22,000 crore, for which they are confident of finding enough resources. When all ministries convey to the finance ministry their actual spending till the third quarter as part of the annual budget making exercise, North Block is confident of finding enough savings to fund any increase in oil subsidy as well as to meet the losses due to tax cuts. The finance ministry has already asked all other ministries to keep there expenses under control for this year.
Next Story
