Facts Regarding Under-recoveries
Sharp increase in Global Crude Oil Prices; Re devaluation adds to the Burden
Under Recoveries of OMCs expected around Rs 1,32,000 crore despite June ’11 duty cuts and price increase
OMCs register Huge Losses; Borrowings at unprecedented levels
The average price of Indian basket of crude oil, which was $85.09/barrel in 2010-11, has now increased by 30% and the average price in the current financial year is around $110/barrel. To worsen the situation Rupee has depreciated from Rs.45/$ to over Rs.49/$ in the recent months. The under-recoveries of OMCs increase by about Rs. 8,000 crore annually on account of every Re.1 depreciation.
In spite of the increase in RSP on 25.6.11 in prices of the three sensitive petroleum products and reduction in customs and excise duties, the Oil Marketing Companies are incurring under-recovery of Rs.8.58 per litre on HSD, Rs 25.66 per litre on PDS Kerosene and Rs. 260.50 per cylinder on Domestic LPG. The total Under-recovery of oil PSUs on sale of 03 products for the year is expected to be around Rs.1,32,000 crore compared to Rs.78,190 crore last year.
The under-recovery of OMCs for the first half of 2011-12 is Rs. 64,900 crore. Despite a cash support of Rs.15,000 crore by the Government and a contribution of Rs.21633 crore by the upstream oil companies, the OMCs have declared huge losses for the first half of 2011-12. The combined losses of BPCL and HPCL for the first half are more than Rs.12,000 crore and IOCL is also likely to be in red, if no further cash assistance is announced.
The crisis faced by OMCs is evident by unprecedented level of borrowings of Rs. 1,29,989 crore necessitated by need for working capital and dollar requirements for payment of funds for import of crude.
The OMCs are working in extremely adverse conditions to provide uninterrupted supplies of petroleum products to the citizens across the length and breadth of the country.
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