"There has been no communication to us from the government about it bearing 57 per cent of the retail losses by issuing bonds. We have been told it will bear 42.7 per cent," said a senior official with Indian Oil Corporation (IOC), the country's largest fuel retailer.
"At 42.7 per cent we will incur losses in the fourth quarter as our retail losses have been very high as a result of high crude oil prices," he added.
The three companies, IOC, BPCL and HPCL bear revenue losses because they are forced to sell petrol, diesel, cooking gas and kerosene at subsidised prices.
A petroleum ministry official said it was talking to the finance ministry on the amount of oil bonds to be issued. "There is no decision yet," the official added.
When prices of petrol and diesel were increased in February, the petroleum ministry had said the government would bear up to 57 per cent of the retail losses of the oil marketing companies as the fuel price rise was not sufficient to meet their losses.
If the government bears 42.7 per cent of the revenue losses, bonds worth Rs 33,300 crore (Rs 333 billion) will be issued for the financial year. At a burden-sharing of 57 per cent the bonds issued would have been about Rs 44,400 crore (Rs 444 billion). Oil companies such as Oil and Natural Gas Corporation (ONGC) and GAIL India also bear 33 per cent of the revenue losses.
The government has already disbursed oil bonds worth Rs 20,300 crore (Rs 203 billion) to the oil marketing companies. It is yet to disburse the remaining bonds.
"It is only the bonds that are helping us make profits," said another official with BPCL, the second-largest fuel retailer.
IOC recorded profits of Rs 7,499 crore (Rs 74.99 billion) in the 2006-07 financial year. In that year bonds worth Rs 13,943 crore (Rs 139.43 billion) were issued to the company. "If it wasn't for the oil bonds we would have gone into losses last year as well," the IOC official said.
The companies are already struggling in spite of the oil bonds. In the quarter ended December 2007, HPCL recorded a net loss of Rs 15.7 crore (Rs 157 million) compared with a net profit of Rs 407.3 crore in the same period of the previous financial year. BPCL's net profit fell to Rs 291.3 crore (Rs 2.91 billion) in the quarter ended December 2007 compared with Rs 303.5 crore (Rs 3.03 billion) in the year-ago period.
IOC had recorded profits of Rs 2,090 crore (Rs 20.90 billion) during that quarter compared with Rs 1,059 crore (Rs 10.59 billion) in the same period last year primarily due to higher refining margins and gains from the appreciation of the rupee against the dollar.
"The positive effect of an appreciating rupee has also been negated in the fourth quarter with the rupee value depreciating to about 40.1 against the dollar," the IOC official said.
The only positive during the quarter for the three oil marketing companies, which also operate crude oil refineries, has been strong gross refinery margins.
"Refinery margins during the quarter and the whole financial year are expected to be nearly $9 per barrel," said the IOC official. In 2006-07 the refinery margins were $4.21 per barrel.
BONDED LABOURS
