Fuel price hike is becoming imperative for oil companies as under recoveries due to sale of subsidised fuel is mounting. In the current year, under recoveries are set to jump to Rs 2.05 lakh crore, according to R.S. Butola, Chairman, Indian Oil Corporation. Last year, under recoveries were at Rs 1.38 lakh crore and in the year before at Rs 75,000 crore. Increasing crude oil prices, depreciation of the rupee against the dollar and volatility in foreign exchange were aggravating the situation.
In 2010, the Government had deregulated petrol price and had said in-principle that it would be followed by diesel price deregulation.
The oil companies believe that the Government should look into pricing. Otherwise, this could impact their ability to borrow and adversely affect their ratings.
Responding to queries by media persons, after addressing shareholders at the annual general meeting of Chennai Petroleum Corporation Ltd, a group company of Indian Oil, he said there can be no ambiguity in under recoveries as the pricing is based on international trade and 90-95 per cent of the cost of refining is due to crude oil.
If a barrel of crude oil increases to $120 then it has to be reflected in the pricing.
Oil companies are losing about Rs 17.12 a litre on diesel, Rs 32 on kerosene, and Rs 347 on a cylinder of LPG, cooking gas.
Losses due to under recoveries in petrol are about Rs 17 crore a day.
Butola told shareholders that the oil import bill had increased to over $14 billion. CPCL plans to add over 6 million tonnes of refining capacity at a cost of Rs 10,000–12,000 crore.