A weakening rupee against the US dollar is putting extra burden on state-owned oil companies which have been holding priceline despite rising losses,Oil Minister S Jaipal Reddy said.
Addressing the Meeting of the Consultative Committee of MPs attached to his Ministry in Mumbai today,Reddy said the exchange rate which was Rs 46 to a US dollar at the beginning of September 2011,is now hovering around Rs 49,according to an official press statement issued here.
“Weakening by every Re 1 impacts the cost of diesel,PDS kerosene and domestic LPG by Rs 8,000 crore per annum,” he said.
Expressing concerns over the impact of weakening rupee over the crude prices and their impact on the under-recoveries (revenue loss) of the oil marketing companies (OMCs),he said the Government was committed to protect the interests of the common man and efforts were being made to minimise the impact of rising crude prices.
The average price of the Indian basket of crude oil,which was USD 69.76 per barrel in 2009-10 has shot up to USD 111 per barrel.
“To minimise the burden of rise in international prices on consumers,the Government has eliminated the customs duty on crude oil and reduced customs duty on petroleum products by 5 per cent. Excise duty on diesel has also been reduced by Rs 2.60 per litre,” he said.
Even after these measures,the OMCs are currently losing Rs 271 crore per day on fuel sales. “They are expected to incur an under-recovery of over Rs 121,000 crores during the FY 2011-12.”
The Minister said the under-recoveries have affected the financial health of OMCs,and diminishing cash flows have reduced resource generation for expansion and modernisation.
“OMCs are forced to borrow even for their working capital requirements,” said Reddy,”If their financial health deteriorates on account of under recoveries,their ability to discharge assigned task of supplying the entire country with petroleum products would suffer.”
The Minister said good financial health of OMCs is a pre-requisite for ensuring long term energy security in the country.