The government on Tuesday ruled out any immediate cut in petrol and diesel prices, saying oil firms were still losing Rs 2,700 crore (Rs 27 billion) per month on fuel sale, but a reduction was possible if global crude oil prices slip below $52 a barrel.
"There is no proposal to reduce petrol and diesel prices. What I have said is that we are studying the impact of falling international oil prices and will consider a reduction only when all losses on fuel sales are wiped off," Petroleum Minister Murli Deora said.
Petroleum secretary M S Srinivasan said oil companies were still suffering losses on diesel, LPG and kerosene sale and the fall in international oil prices has helped them make marginal profit only on petrol.
"The four sensitive products of petrol, diesel, LPG and kerosene make up for 66 per cent of the total volume of petroleum products. Of this, petrol accounts for only 8 per cent and the rest 58 per cent were still being sold at a price below cost," he said.
While on petrol, oil firms were making a profit of more than Rs 4 per litre, but on diesel they were incurring a loss of Rs 1.62 per litre. On kerosene, they were losing Rs 14.75 per litre and Rs 102 per LPG cylinder.
"Despite the fall in international prices to around $56 a barrel (from highs of $75 per barrel in August), the oil companies will suffer a Rs 2,700 crore (Rs 27 billion) loss on fuel sale this month," Srinivasan said, adding that a cut in petrol and diesel prices can be considered if prices fall to $52 a barrel.
Srinivasan said the domestic retail price of kerosene is frozen at $28 per barrel, while LPG price is pegged at $33 per barrel.
"What it means is that till prices fall to these levels, oil companies will continue to make losses on these products," he said.
The current diesel price has been pegged at $54 a barrel, while petrol price is benchmarked to $58. Since international oil prices have fallen to around $56 a barrel, the companies are making profit on petrol but continue to make losses on diesel.
Deora said although the international oil prices have fallen from a high of over $75 a barrel in August to just over $56 per barrel now, oil companies continue to make losses on sale of diesel, cooking gas (LPG) and kerosene.
A decision to cut petrol and diesel prices, which were raised on June 5 by Rs 4 and Rs 2 a litre, respectively, would depend on the extent of oil bonds the government would give the oil companies to cover for losses on LPG and kerosene sale and the contribution to be made by upstream firms such as ONGC, he said.
The government is to issue oil bonds worth Rs 28,300 crore (Rs 283 billion) to oil marketing companies such as IOC, BPCL and HPCL for the full fiscal and issued first tranche of bonds worth Rs 5,000 crore (Rs 50 billion) last month.
Two more tranches of similar amount are likely to be issued in November-December to cover for losses on LPG and Kerosene in April-September period.
Upstream oil firms are to chip in with Rs 24,000 crore (Rs 240 billion).
"The estimated under-recovery on fuel sale for the full fiscal is Rs 67,500 crore (Rs 675 billion)," Srinivasan said.
