Poll buzz keeps petro prices down

Look who is paying for the government’s decision not to hike petrol and diesel prices keeping in mind the pending Lok Sabha elections. ...

Look who is paying for the government’s decision not to hike petrol and diesel prices keeping in mind the pending Lok Sabha elections. Oil marketing companies are bearing the brunt once again. As global crude oil prices continued to shoot up and almost touched a 12-month peak on Monday to reach post-Iraq war highs, oil marketing companies in India, ie IOC, BPCL and HPCL continue to take a hit on their bottomline.

According to sources in the oil marketing companies, in the last couple of weeks since international crude prices have been on the upswing, oil marketing companies have taken a hit to the tune of Rs 80 crore. This amount is expected to go up further, keeping in mind that the prices have now shot up to post-Iraq war levels. US Light crude ruled at around $37.17 a barrel on Monday. On average the oil marketing companies in India sell 1.5 million tonnes (MT) of diesel besides petrol and kerosene.

Though, after the deregulation of the petroleum sector and subsequent dismantling of the administered price mechanism, oil companies are free to revise the prices of petrol and diesel, in effect they cannot do so without the nod of the administrative ministry. In fact, India’s total import amount for the current financial year is estimated at 70 MT. According to industry estimates, the import bill for the current financial year could tounch Rs 88,000 crore. However, some solace can be taken from the fact that there is excess refining capacity in the country at present and further exports of oil products have also picked up which in turn could bring down the net import bill to some extent.

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The rise in the curde prices is however good news for ONGC which would get import parity price for the 23 MT of crude produced by it. Given the fact that the average Indian basket price for the year may touch $28 a barrel as compared to the average price of $26.59 a barrel in the previous year, ONGC is expected to gain in leaps and bounds from this. Estimates show that this could perk up the profit after tax of ONGC to the tune of Rs 280 crore, sources added.

The only solace for the oil marketing companies would be the fact that part of the oil pool deficit (which ceased to exit after the government announced oil pool account would be diluted) would also be shared by ONGC and GAIL.