Freeze on petroleum price deals IOC Rs 2,143 cr loss

When asked why the company could not take the hit when its net profit has touched Rs 7,005 crore in 2003-04, Ramachandran said ‘‘if you want the company to run on commercial terms you cannot force it to incur losses like this. Do you want this company to suffer a loss?’’, he asked. However, he clarified that ‘‘IOC would not end up making losses (in the first quarter of 2004-05), despite the hit, mainly because gross refinery margins were good at $5.6 a barrel. But profitability would be very badly eroded as the retail arm was selling products at prices lower than the rate at which they procure products from refineries,’’ he said.

Petrol and diesel prices have not been revised since January even though crude oil has jumped by more than 7 dollars a barrel. Ramachandran said IOC was open to a price-band for petrol and diesel but said slashing duty on crude and petroleum products was a more viable option. The import parity price, the benchmark for deciding the domestic price, of petrol has risen by 20.6 per cent and diesel by 22.8 per cent during the period. Based on the spurt, public sector oil companies have been demanding a Rs 3.53 per litre increase in petrol prices and Rs 2.25 per litre in diesel prices. On LPG and kerosene, the oil companies have estimated an under-recovery of nearly Rs 14,000 crore in 2004-05 because of unchanged prices in the last two years and reduction in budgetary support to one-third from April 2004.

Ramachandran said state-run oil companies were not making undue profits and the net profit of Rs 7005 crore in 2003-04 was mainly due to good refinery margins – the difference between the cost of crude oil and product prices. ‘‘Our books are open to everybody (for inspection). Do you think the ministry of petroleum and natural gas will allow us to make undue profits,’’ he said when asked about reports of oil companies loading 20 per cent customs duty on the retail price when the actual customs duty they paid on crude was only 10 pc .

Ramachandran said the government was devising a policy for pricing of four sensitive petroleum products — petrol, diesel, LPG and kerosene. He supported the idea of a price stabilisation fund for petro products.