Oil producers give a discount of $56 on each barrel of oil they sell to public sector refiners
The sharp fall in international oil prices has spread some cheer among consumers. Petrol and non-cap cooking gas has become cheaper since March. Even the small dose of monthly hike in diesel price is on hold.
But ironically, the domestic oil producers are feeling the pinch of low global prices. Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) have cried foul, saying they were left with hardly any money after giving discounts to refiners at old rates. The oil producers give a discount of $56 on each barrel of oil they sell to public sector refiners as their share of subsidy on diesel, cooking gas and kerosene. Both ONGC and OIL have argued that the discount was decided when oil prices averaged $108 a barrel.
The oil producers have said crude prices have declined to $97-$98/barrel since March but their cost of pumping each barrel still remains $38. So, after giving discount at the old rate, they are left with just $4 a barrel.
ONGC’s director (finance) A K Banerjee has told the ministry that the situation is even worse. This is because the government also includes its production of condensates — low-density mixture of hydrocarbon liquids that accompany natural gas — for calculating its total output, which pushes its discount to $63/barrel.
OIL’s director (finance) TK Ananth Kumar has cited that the lower crude prices, several hikes in diesel prices and cap on cheap cooking gas cylinders would also reduce the government’s total subsidy burden as the gap between retail prices and market rate of fuels have narrowed substantially.
Under the circumstances, their discount needs to be spared so that they have enough left to cover “increasing costs of production and increasing investment in exploration and production”, Kumar has argued.
The sharp fall in international oil prices has spread some cheer among consumers. Petrol and non-cap cooking gas has become cheaper since March. Even the small dose of monthly hike in diesel price is on hold.
But ironically, the domestic oil producers are feeling the pinch of low global prices. Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) have cried foul, saying they were left with hardly any money after giving discounts to refiners at old rates. The oil producers give a discount of $56 on each barrel of oil they sell to public sector refiners as their share of subsidy on diesel, cooking gas and kerosene. Both ONGC and OIL have argued that the discount was decided when oil prices averaged $108 a barrel.
The oil producers have said crude prices have declined to $97-$98/barrel since March but their cost of pumping each barrel still remains $38. So, after giving discount at the old rate, they are left with just $4 a barrel.
ONGC’s director (finance) A K Banerjee has told the ministry that the situation is even worse. This is because the government also includes its production of condensates — low-density mixture of hydrocarbon liquids that accompany natural gas — for calculating its total output, which pushes its discount to $63/barrel.
OIL’s director (finance) TK Ananth Kumar has cited that the lower crude prices, several hikes in diesel prices and cap on cheap cooking gas cylinders would also reduce the government’s total subsidy burden as the gap between retail prices and market rate of fuels have narrowed substantially.
Under the circumstances, their discount needs to be spared so that they have enough left to cover “increasing costs of production and increasing investment in exploration and production”, Kumar has argued.
Next Story
