IOC, BPCL, HPCL face Rs 13,400 crore rev losses
Mumbai   24-Jul-2010

State-owned fuel retailers IndianOil (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) may be forced to absorb Rs13,381 crore of revenue losses on fuel sales during April-June as the government is unlikely to pay any compensation now, oil ministry and industry sources said.

Usually, the petroleum ministry intimates the three oil marketing companies beforehand on the quantum of government subsidy to allow the companies to factor it in their quarterly earnings, though the actual compensation is paid later.

"This time (April-June), we have not received any intimation from the oil ministry so far. It is unlikely to come now," a senior official with one of the fuel retailing companies said.

"Without adjustment of government compensation, it is going to be extremely tight for the oil marketing companies and is likely to post losses during April-June," said an official with another fuel retailer.

The three companies incurred a gross revenue loss of Rs20,072 crore during April-June on sale of automobile and cooking fuels which are government-regulated prices.

An oil ministry official said the state-owned upstream companies-Oil and Natural Gas Corp Ltd, Oil India Ltd and GAIL (India) Ltd-have given their share of subsidy amounting to Rs6,691 crore for the quarter.

"ONGC's share of subsidy during April-June stood at Rs5,516 crore, Oil India's Rs730 crore and GAIL's Rs445 crore," said the ministry official.

IndianOil will account for Rs3,671 crore of the upstream subsidy, BPCL will get Rs1,550 crore and HPCL will factor in Rs1,470 crore.

Government sources said the oil ministry has already requested the finance ministry on the issue of compensation for oil marketing companies.

Industry sources said the government is likely to take some more time to decide on the compensation for 2010-11 (April-March) as it is yet to take the parliamentary approval for the last tranche of cash subsidy amounting to Rs14,000 crore given to the oil marketing companies for January-March (2009-10).

"The finance ministry is likely to seek parliamentary approval now only for the Rs14,000 crore cash compensation in the first supplementary demands for grants for 2010-11," the oil ministry source said.

The month-long monsoon session of Parliament will begin Monday.

The government had previously said it will bear at least 50% of the gross revenue loss for 2010-11, while upstream companies will pay 33% of the under-recoveries at Rs6,600 crore.

However, there is no decision yet on the remaining 17% of the revenue loss.

Revenue losses of the state-owned fuel retailers have widened during April-June vis-a-vis year-ago quarter due to increase in crude oil prices.