M A I N   N E W S

Are oil companies really in trouble?
Bhagyashree Pande
Tribune News Service

New Delhi, May 26
If the oil marketing companies like IndianOil , Hindustan Petroleum, and Bharat Petroleum are to be believed for the under-recoveries that they claim they are making, think again. As the bickering between the oil ministry and finance ministry intensifies over oil bonds and the under-recoveries in the wake of surging crude prices, there are many claims made by the oil marketing companies which are questionable. At the centre of the mess is the consumer, who is paying a higher price for petrol, suffering unavailability of LPG and kerosene, and who in future will also keep paying for the oil bonds, as they mature in the next 10-20 years.

Here are some facts that are a real eye opener. The three companies claimed an under-recovery of Rs 77,000 crore in 2007-08. Under-recoveries are defined as the difference between the government selling price and what the company should get as per the government-approved pricing policy.

Despite claiming under-recoveries, IndianOil Corp (IOC) has seen its net profit, from the sale of petroleum products, grow by 52 per cent during the nine-month period of April-December 2007, as against last year. In addition to this, the sales of the company has gone up by 7 per cent. The company claims that it is losing on sale of petrol, diesel, LPG and kerosene, but it is making huge profits from the sale of aviation turbine fuel (ATF), petrochemical products, sale of gas and other related products in the petroleum family.

What is really surprising is that there is never a shortage of ATF and other petroleum products in the market, but there is shortage of LPG and kerosene, which is scarcely available at PDS shops, says a source in the oil industry.

The common man is really going to suffer for the faulty policies of the government, as he will pay for high prices of petrol today and suffer unavailability of basic fuels. And in future, the suffering will be when these oil bonds come up for payment and the government will indirectly raise tax on petrol or on income.

Looking at the rising profits of other two companies — Bharat Petroleum’s sales in the nine-month period (April-December 2007) went up by 10 per cent and the net profit during the same period went up by 13 per cent to Rs 17,987 crore.

Hindustan Petroleum’s net profit has seen a marginal dip (though not a loss) and stood at Rs 750 crore (against Rs 1,021 crore last year) between April- December 2007 and the net sales for the company has risen by 10 per cent.

The above calculations show that companies are making a profit despite the fact that the government has controlled their retail selling price on four products. The gross profits of these three companies in the nine-month period between April-December 2007 is Rs 37,360 crore. If we add the oil bonds issued by the government worth Rs 20,332 crore to the above profit, then the total income of these companies stands at Rs 57,692 crore.

With such largesse do the oil companies need more bonds and duty cuts? For a government company is this not enough profit? The purpose of oil companies is to serve the people and not just make huge profits, says a political observer.

Petrol prices may be decontrolled

The UPA government is likely to imitate the NDA government’s act of dismantling administered price mechanism, at least for petrol. Sources in the government are believed to be considering decontrolling petrol prices. This move, if approved only for petrol, and not for diesel, will see a shift of demand for diesel and create further distortions in the economy, says a political observer.

The proposal, which is mooted by the oil ministry for freeing petrol prices from the government control, would mean that the price of petrol will rise by Rs 16-17 a litre. Diesel hike is not provisioned as it is used by transport industry and may have a cascading effect on inflation.

The diesel prices, even though controlled, will see a rise of Rs 2-3 a litre. Deregulating petrol price would mean that its prices would move in tandem with international prices.

LPG Connections
Deposit hiked to Rs 1,250

New Delhi, May 26
State-run oil firms today hiked the security deposit charges for new cooking gas (LPG) connections by Rs 400 to Rs 1,250 per cylinder, even as uncertainty continued over the issue of raising fuel prices.

The cost of gas regulator has also been raised to Rs 150 as against Rs 100 a piece earlier. — PTI