Oil cos gain 2 per litre on petrol, but won’t cut prices

Lower Crude Rates, Stronger , But No Relief

Mumbai: State-owned oil marketing companies (OMCs) have been earning profits on petrol, helped by a fall in global crude price and an appreciating rupee. 

    Back-of-the-envelope calculations suggest that oil firms are making profits of around Rs 2 per litre since September 16 but have so far been pocketing the gain and not passing it on to consumers. The calculations are based on the thumb rule given by IndianOil chairman R S Butola, which says that for every rupee gain against the dollar, petrol becomes cheaper by 77 paise and for every dollar fall in crude oil prices, it becomes cheaper by 33 paise. 
    The average price of the Indian basket of crude oil has fallen by $3.74 to $109.9 during the fortnight of September 16-30 compared to $113.64 in the previous fortnight. During this period, the rupee has strengthened against the US dollar by Rs 1.82 to Rs 53.65 compared to Rs 55.47 in the previous fortnight, thus making it possible for oil companies to reduce petrol prices by around Rs 2 per litre. However, there has been no reduction. 
    This is in contrast to Pakistan where oil companies slashed petrol prices by Rs 6 a litre effective Monday. 
PSUs hike cost of non-subsidized LPG cylinder by 138 to 894 
    Consumers in Mumbai will have to shell out a steep Rs 138 or 18% extra for a non-subsidized cooking gas cylinder as oil firms have increased prices from Rs 756 last month to Rs 894 with effect from October 1. This makes it the first upward revision since the government capped the number of subsidized cylinders to six a year. Prices of LPG and kerosene are calculated on a monthly average basis. So, even though crude and LPG prices have reduced over a 15-day period, they have actually gone up over a month, said an oil PSU official. Consumers will feel the brunt once they exhaust the quota of three subsidized cylinders for the rest of the year from September 14, following which they will have pay double the existing rate of Rs 423. P 2 'We have lost $1bn on sale of petrol' OMCs Say Nobody Complains When They Are Not Allowed To Raise Prices 
Mumbai: Although the falling crude rates and an appreciating rupee have helped stateowned oil marketing companies earn profits on petrol, the consumer has not benefited from it. According to the Petroleum Planning and Analysis Cell (PPAC), from October 1, Indian oil firms are paying Rs 42.61 to refiners for every litre of petrol. It is then sold to dealers at Rs 46.54 a litre, including transportation costs and marketing margin. It is then sold at Rs 68.46 a litre in Delhi and Rs 75.15 in Mumbai to retail consumers due to various levies and taxes. 
    A Hindustan Petroleum board member confirmed to TOI: "Yes, we are now profitable on petrol. However, I am not obliged to say how much profit we am making on selling petrol as it is a free (deregulated) product." 
    A senior BPCL executive too admitted that oil firms are earning profit on petrol. "When we do not reduce prices, oil firms are made to look like villains. But no one complained when we were not allowed to raise prices and were forced to sell petrol at a loss. We will now wait and watch and if the same trend continues (crude oil softens & Indian rupee strengthens), then we will surely pass on the benefits to the consumers in due course," the official said without committing on a date. 
    Some oil marketing firms are defending their move of not having reduced petrol prices so far. "Oil firms have so far lost about $1 billion (over Rs 5,000 crore) on sale of petrol, which will not be compensated to us by the government since petrol is a deregulated product. How do we justify such losses on our books to our shareholders and the federal auditor?" an IndianOil executive said. 
    "It seems that OMCs wants to make up for a part of the losses that they have incurred on petrol in the earlier quarters before passing on the benefits to the consumers," said a Mumbai-based analyst. Oil firms are still losing Rs 11.65 per litre on sale of diesel, Rs 33.93 per litre on sale of kerosene and Rs 468 per cylinder on cooking gas. 
    So far they have already lost Rs 47,811 crore during the first quarter, exceeding the Rs 40,000 crore allocated in the union budget for fuel subsidy.