IOC's director-finance SV Narasimhan told ET NOW that he expects the company to incur over Rs 12,000 crore of unmet under-recoveries for the current financial year as the government is yet to fully compensate oil marketing companies for the losses they made in selling LPG and Kerosene. Under-recoveries are the losses incurred by oil companies for selling fuel at subsidized prices.
" For the current year, Indian Oil's estimated under-recoveries is about Rs 26,500 crore, out of which LPG and Kerosene is Rs 19,500 crore. Out of this 19,500 crore, because petrol and diesel were compensated, we are getting 7,100 crore so far for the whole year. So that will leave about 12,000-odd crore as unmet under-recoveries," Mr Narasimhan said.
He further said, "We hope that some mechanism will be found between ministry of petroleum and finance, if the price increase (fuel price hike) does take place, after adjusting that. Because even if price increase takes place, that will be for a month and maybe for few products. So under recoveries for current year will continue in any case. So there has to be some mechanism to compensate."
Economist Kirit Parikh presented a report on fuel pricing to the petroleum minister earlier this month, where he made a case for deregulation of oil prices besides recommending an immediate hike in the price of kerosene by Rs 6 per litre and LPG by Rs 100 a cylinder. The committee pegged the losses of state-run oil marketing companies at Rs 40,000 crore because of the current subsidized price regime.
However, the Union Cabinet hasn't hiked fuel prices yet as the panel's recommendations did not cut ice with political parties- both part of the ruling UPA and the Opposition.
"There are talks everywhere about whether petrol should be de-regulated. But we do not know what will ultimately happen. Crude oil is again going up, touching $80 a barrel. So far, it's ranged from $70-$80. But we have to be prepared for the eventual increase to $90 or $100 and all. Because at that time, it may become too late to take a decision if a sudden spurt is there. So, perhaps, some of the recommendations of the Kirit Parikh panel could be implemented now because prices are in manageable limits," IOC's Narasimhan said.
However, he was non-committal about the impending fuel price hike or whether it can be expected in the Union Budget later this week.
"Fuel price hike is not decided by the company. Companies only want to see that they don't suffer because of the price revision not taking place. The government is now compensating petroleum and diesel 100%. So, whether they increase or don't increase (fuel price), that is their call and we want 100% compensation. One good thing will be if the price goes up, we will get immediate cash accruals."
On the demand front, Mr Narasimhan said that the demand is very high, with petrol growing at 15% and diesel at 8.5%. While LPG grew at 5-6%, kerosene is constant. "Growth is robust, partly because it's all subsidized. If prices go up, then at least there will be some check on the efficiency of consumption."
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