Estimates of revenue losses, or under-recoveries, of oil marketing companies for the current financial year have declined 22 per cent, compared with estimates at the beginning of 2012-13.

While the figure is still higher than last year's under-recovery of Rs 1,38,541 crore, it has declined from Rs 2,05,500 crore in April to about Rs 1,60,000 crore.

Despite the weakening rupee, the sharp decline in crude oil prices has brought down under-recoveries on the three regulated products — diesel, kerosene and domestic liquefied petroleum gas.

In April, the three oil marketing companies ”IndianOil, Bharat Petroleum and Hindustan Petroleum ” were losing Rs 563 crore a day on these products.

However, now, the losses have declined to Rs 446 crore a day, providing relief to these companies, which depend on borrowings to fund the under-recovery, as compensation from the government comes with a lag.

An increase of $1 in crude oil prices results in additional working capital requirement of Rs 350 crore for IndianOil.

From an average of $118.04 a barrel in April and $108.13 a barrel in May, the Indian basket of crude oil has come down to an average of $95.62 so far in June. On June 22, it fell to $89.19, the lowest since April 2011.

Going by the trend, the under-recovery is expected to decline further next month. On diesel, which accounted for nearly 60 per cent of the total under-recovery in 2011-12, oil companies were losing Rs 14.36 per litre in early April.

This has now declined to Rs 10.20, and is expected to fall further to about Rs 9 from July, said an oil company official. The declining trend provides relief, as prices have not been revised for long, he added.

Losses on diesel, kerosene and domestic liquefied petroleum gas are compensated through discounts on crude oil sale by ONGC and OIL, as well as cash compensation from the government.

Of the Rs 138,541 crore of losses in the last financial year, 37.91 per cent was compensated by ONGC, OIL and GAIL, while the government accounted for the remaining amount. For the current financial year, the government provided for Rs 40,000 crore in the Budget towards fuel subsidy.

Prices of the three regulated products were raised in June. Petroleum Minister Jaipal Reddy had sought a meeting of the empowered group of ministers that reviewed prices of these. However, with group chairman and Finance Minister Pranab Mukherjee becoming a candidate for the presidential elections, the meeting is unlikely anytime soon.

Source : business-standard.com