Press Esc to close
Tuesday 25 July 2017
News updated at 8:06 PM IST

Under-recoveries to remain high despite oil price hike

Last updated: 25 June, 2010
Bangalore/New Delhi, June 25, DHNS & Agencies: 22:20 IST

Major policy reform: Industry welcomes Centres move

The governments decision, on Friday, to abolish price control on petrol and raise prices of diesel, kerosene and cooking gas will see a whopping Rs 24,000 crore of savings for oil marketing companies in a full year.

As a result, total under-recoveries from oil will comedown from Rs 77,000 crore in a year to Rs 53,000 crore, a drop of 31 per cent.

This means that oil marketing companies together will save Rs 24,000 crore in a year and their earnings rise by that extent. Yet, the under-recoveries will continue at a disturbing level. As the price of petrol has been completely freed, it is expected that oil companies will now charge market price and fully recover Rs 7,500 crore of under-recovery. But in case of three other petroleum products, diesel, LPG and Kerosene, under-recovery will still be Rs 15,000 crore, Rs 21,000 crore and Rs 17,000 crore, respectively. (see table).

Politically sensitive

In fact, in case of two politically sensitive items LPG and kerosene, which are consumed by common men, the price rise will save only 12 per cent and 15 per cent of the under-recoveries. This also means that the government will continue to subsidise oil products.
“If there would have been no hike in retail prices of diesel, under-recoveries for diesel alone would have been Rs 25,000 crore, which is a burden which the government and upstream oil companies cannot bear,” said Petroleum Secretary S Sundareshan.

As per Petroleum Ministry estimates, state-owned OMCs are currently selling petrol at a loss Rs 3.73 per litre, diesel at a loss of Rs 3.80 per litre, kerosene at Rs 18.82 a litre and domestic LPG at a discount of Rs 261.90 on every 14.2-kg cylinder. Market analysts say as a result of these upward revision in retail prices of four mass-consumed petroleum products, state-owned OMCs would stand to gain by 10 to 13 per cent.

ONGC Chairman & Managing Director R S Sharma said decontrolling of auto fuel prices as well as hike in prices of other petroleum products would bring relief for upstream as well as downstream industry.

New formula

Petroleum Minister Murli Deora there will also be new formula for subsidy sharing. “The existing formula was just ad hoc on quarter to quarter basis. We still remain clueless as to what are details of the new formula. But apparently one thing is obvious we do foresee a big relief for the sector at large,” ONGC chief said.

India Inc, on Friday, hailed the decision saying the government has demonstrated ability to take a difficult political decision. However, at the same time, the leading chambers of industry also talked about the inflationary pressures due to the decision to hike prices of petro products and free petrol from any administrative price control.

“CII welcomes the decision to deregulate fuel prices. While this will have some negative impact on the inflation in the short term ... the government has shown the ability to implement policy changes even if they are politically difficult,” CII said. According to Ficci, the government has taken a “very nuanced approach” in freeing up petrol prices. Despite voicing inflationary concerns, the chambers said the move would have a negative impact on the inflation which has reached the double digit. But it would help bring viability in the country’s oil economy.

Go to Top

Photo Gallery
The Jewish bagel served with a twist in funky colours at the ongoing International Food Festival...

The Jewish bagel served with a twist in funky colours at the ongoing International Food Festival...

Dark clouds seen over the Parliament house during the ongoing monsoon session in New Delhi...

Dark clouds seen over the Parliament house during the ongoing monsoon session in New Delhi...

Congress MPs Sushmita Dev, K Suresh and Gaurav Gogoi after they were suspended by the Speaker...

Congress MPs Sushmita Dev, K Suresh and Gaurav Gogoi after they were suspended by the Speaker...

Bolylywood actress Kajol and South Star Dhanush during the promotional press conference....

Bolylywood actress Kajol and South Star Dhanush during the promotional press conference....

Union Minister for Finance and Corporate Affairs Arun Jaitley with MoS Santosh Gangwar...

Union Minister for Finance and Corporate Affairs Arun Jaitley with MoS Santosh Gangwar...

MNS Party Workers protest against Chinese products at Airoli over ongoing rift between Indian...

MNS Party Workers protest against Chinese products at Airoli over ongoing rift between Indian...

School girls carry water to pour on Lord Shiva in Bhubaneswar on Monday...

School girls carry water to pour on Lord Shiva in Bhubaneswar on Monday...

Bollywood actors Arjun Kapoor, Ileana D'Cruz and Athiya Shetty during the promotion...

Bollywood actors Arjun Kapoor, Ileana D'Cruz and Athiya Shetty during the promotion...

Fire fighters dousing a fire that broke out at Lok Nayak Bhawan in New Delhi on Monday...

Fire fighters dousing a fire that broke out at Lok Nayak Bhawan in New Delhi on Monday...

National Disaster Response Force (NDRF) men rescuing a villager from a flood-hit area in Morbi...

National Disaster Response Force (NDRF) men rescuing a villager from a flood-hit area in Morbi...

Like us on Facebook

Copyright 2017, The Printers (Mysore) Private Ltd., 75, M.G Road, Post Box 5331, Bengaluru - 560001
Tel: +91 (80) 25880000 Fax No. +91 (80) 25880523
Powered by Yodasoft Technologies Pvt. Ltd.