Non-refund of retail losses may push NRL into red

Numaligarh Refinery Ltd (NRL) of Assam, which does not enjoy the compensation for retail marketing losses that is available to three other public sector oil companies IOCL, BPCL and HPCL, may lose Rs 400 crore-Rs 500 crore this year on this account. The 3 mmtpa refinery, which has been functional since since 2004, does not get any discount on crude oil purchased from Oil India Ltd (OIL) and Oil and Natural Gas Corporation (ONGC) or government oil bonds.

An NRL official said that if the government allows such huge losses to continue, they may even outstrip the profit generated from the refinery, making the company economically unviable. “To prevent such a situation, NRL now has no option but to consider increasing retail prices of petrol and diesel, to at least partially reduce its retail marketing losses,” he added.

Crude oil prices have registered a massive rise over the past year. The price NRL pays has gone up from $68.66 per barrel in April 2007 to $111.94 per barrel in April 2008, with the rising trend continuing. “While this amounts to an increase of around Rs 11 per litre in the crude price, the increase in retail selling price has been only marginal to the tune of Rs 2 per litre for petrol and Re 1 per litre for diesel effected in February 2008. This has resulted in huge losses for companies engaged in petroleum retailing,” the NRL official observed. The current loss for the industry is around Rs 14 per litre for petrol and Rs 21 per litre for diesel.