No immediate hike in oil prices

The government is unlikely to raise petrol and diesel prices before the end of the current monsoon session of Parliament and may moderate the hike with a dose of excise duty cut, a top official said on Wednesday.

"We don't see a Cabinet meeting happening on the fuel prices before the end of Parliament session next weekend," the official said.

Public sector oil firms, who incurred a cash loss of Rs 1,516 crore (Rs 15.16 billion) in July on top of net losses in Q1 on selling fuel below the cost, have sought Rs 5.29 per litre increase in petrol and Rs 4.54 a litre hike in diesel prices.

But the government may settle for a hike of between Rs 1 to 2 per litre each combined with excise duty reduction on petrol from 8 per cent plus Rs 13 a litre to 8 per cent plus

Rs 12 a litre and that on diesel from 8 per cent plus Rs 3.25 a litre to 8 per cent plus Rs 2.25 per litre.

The official said fuel retailing business had become economically unviable due to government freeze on raising retail prices despite spurt in cost of raw material. This has resulted in oil marketing companies  -- Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corp and IBP -- making huge losses while pure refiners -- Chennai Refinery, Kochi Refinery and Mangalore Refinery -- were making good money as they get international price for the fuel they produce.

"One way is to merge standalone refineries with OMCs to increase their profitability. But this is a long-term option and it will take some time," the official said.

If implemented, Chennai Refinery may be merged with IOC, Kochi with BPCL and HPCL may get Mangalore Refinery.

The official said oil firms have also sought a Rs 91.95 per cylinder increase in LPG price and Rs 11.45 a litre hike in kerosene price.

IOC, which made a net loss of Rs 54 crore (Rs 540 million) in April-June, further incurred a cash loss of Rs 564 crore (Rs 5.64 billion) in July while HPCL's net loss of Rs 508 crore (Rs 5.08 billion) in Q1 was further compounded with a cash loss of Rs 343 crore (Rs 3.43 billion) in July.

BPCL, which made a net loss of Rs 431 crore (Rs 4.31 billion) in Q1, saw a further Rs 425 crore (Rs 4.25 billion) cash loss in July. IBP had Rs 184 crore (Rs 1.84 billion) cash loss in July over Rs 234 crore (Rs 2.34 billion) net loss of April-June.

The official said petroleum ministry had already submitted a note for Cabinet consideration on raising fuel prices but the Cabinet was unlikely to meet before August 26, when the current monsoon session of Parliament ends.

"No proposal for merger of standalone refiners with oil marketing companies is being made now. It will come later. Already BPCL has plans to merge KRL with itself and IOC is merging its subsidiaries IBP and Bongaigaon Refinery with itself. In due course they would also take Chennai refinery under their fold," he said.