Bharat Petroleum Corp, Hindustan Petroleum Corp and IBP will turn financially sick by next year as losses arising from freeze on fuel prices are set to erode their net worth, according to oil ministry estimates.
IBP, a subsidiary of Indian Oil Corp, will be the first company to turn sick by September 2005, followed by BPCL which will take just 13 months from now go to the Board for Industrial and Financial Reconstruction,while HPCL would be sick in 20 months, Petroleum Secretary S C Tripathi wrote to the Cabinet Secretary B K Chaturvedi.
IOC will be sick in 35 months from now if petrol, diesel, LPG and kerosene prices are not changed in line with the spurt in international oil prices, which touched a record $64 a barrel on Tuesday.
Petroleum Minister Mani Shankar Aiyar said the Cabinet is to decide on raising fuel prices but did not give any timeframe.
According to Tripathi's letter, IOC, which reported first ever net loss of Rs 54.2 crore (Rs 5.42 million) in April-June quarter, suffered an estimated loss (including depreciation) of Rs 744 crore (Rs 7.44 billion) in July alone. BPCL netted a loss of Rs 400 crore (Rs 4 billion) over Rs 431.3 crore (Rs 4.313 billion) loss in Q1, while HPCL saw Rs 475 crore (Rs 4.75 billion) loss in July on top of Rs 507.89 crore (Rs 5.078 billion) net loss of April-June quarter.
IBP, the letter said, had a net worth of Rs 324 crore (Rs 3.24 billion) as on June 30, 2005 and reported a loss of Rs 189 crore (Rs 1.89 billion) in July.
The standalone fuel retailer, which reported a net loss of Rs 233.97 crore (Rs 2.339 billion) in April-June, is set to lose its net worth in next two months, a milestone which will take it to the BIFR.
Commenting on crude oil prices touching a record $64 a barrel, Aiyar said: "I am worried but not too worried. . . the government has resources (foreign exchange) to manage our requirements."
Petrol is currently being sold at Rs 3.63 a litre below the cost while diesel is under-priced by Rs 4.15 per litre.
LPG is being sold at a loss of Rs 92 per cylinder and the public sector oil firms were losing Rs 11 on sale of every litre of kerosene.
Tripathi's letter stated that the IOC, BPCL, HPCL and IBP together suffered a cash loss of Rs 1,500 crore (Rs 15 billion) in July alone due to freeze on fuel prices despite rising cost.
Aiyar stated that the government would try to do a balancing act between the interests of consumers and the oil firms and said the issue of raising fuel prices rested with the Cabinet and his ministry had already sent its proposal to it.
"All the information in this regard has been shared with the Cabinet. . . that (price increase) is for the Cabinet to decide," he said.
The petroleum minister said the spurt in international prices was based on apprehensions of disruption in supplies even though there has been no interruption in the past 18 months when the apprehensions started driving prices upward.
"There is nothing in global economy to warrant such a rise. Not one drop of oil has been lost. It has become a fashion statement rather than any kind of reflection on global realities," he said.
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