Public sector oil firms make profit on petrol, diesel sales

Public sector oil companies have for the first time in more than a year started making profit on sales of petrol and diesel, strengthening the case for a fuel price cut soon. But the oil companies do not want to reduce prices now as they continue to lose Rs 82 crore per day on PDS kerosene and domestic LPG. Indian Oil, Bharat Petroleum and Hindustan Petroleum, who started making profit on sales of petrol from November 1, have now broken even on diesel sales, an industry official said. With international crude oil prices sliding further on falling demand as major economies slow down, the three firms are making a net 70 paise per litre profit on sales of diesel while they earn Rs 9.86 per litre extra on selling petrol above the imported cost. Based on the average international oil prices in the first fortnight of November, the state-run firms are earning a margin of Rs 16 crore per day on petrol and Rs 5 crore a day on diesel. However, they continue to lose on kerosene sold through ration shops and domestic LPG. Kerosene is being sold at a loss of Rs 22.40 a litre and LPG at Rs 343.49 per cylinder. The fall in international oil prices will result in lower revenue loss on fuel sales this fiscal. IOC, BPCL and HPCL will end the 2008-09 fiscal with Rs 122,710 crore revenue loss, Rs 92,853 crore of which has already been accounted for in the first half of the fiscal. The official said oil companies wanted to use gains on sales of petrol and diesel to make good part of the loss on kerosene and LPG sales. "Reducing petrol and diesel prices now will wipe away this golden opportunity." "It is good news that oil companies have started to make profits. But we will want the current international oil price trend to stabilise to give us the comfort that the current margins will not be wiped away when prices rise tomorrow," an Oil Ministry official said. "Please wait a little longer for any price reduction to happen," he said. The profit being earned on petrol and diesel will not be enough to wipe out the net losses the three firms reported in the second quarter ended September 30, 2008. IOC posted its largest ever net loss of Rs 7,047.13 crore in the July-September quarter. BPCL posted a net loss of Rs 2,625.17 crore in the second quarter on top of Rs 1,066.70 crore in April-June, while HPCL reported Rs 888.12 crore loss in Q1 and another Rs 3,218.92 crore in Q2. The state-run firms want the government to increase the quantum of oil bonds they get as part compensation for selling fuel below cost. The government compensates the three refiners for half of their revenue loss on fuel sales by way of oil bonds. Another one-third of the losses are met by companies like ONGC and OIL by way of discounts on crude oil they sell to them. However, this compensation was proving to be grossly inadequate, the official said, pointing to the net losses posted by the companies in the July-September quarter.