New Delhi: Oil marketing companies are under-recovering Rs 750 crore a day on the sale of petrol, diesel and domestic LPG cylinders below market prices, the government said on Monday. Before the price of petrol and diesel was raised by Rs 3 per litre late last week, the under-recoveries incurred by OMCs were estimated at Rs 1,000 crore a day.
“The losses of OMCs would be around Rs 750 crore a day, taking petrol, diesel and domestic LPG together,” said Sujata Sharma, joint secretary in the ministry of petroleum and natural gas, at a media briefing on the developments in West Asia. She added that there was no proposal before the government to bail out oil companies - IndianOil, Bharat Petroleum and Hindustan Petroleum - for selling petrol and diesel below market prices.
Sharma also refused to comment on the possibility of another hike in petrol and diesel prices and said she could only speak about the situation on a particular day.
Background on Under-Recoveries
Speaking at the CII Business Summit last week, petroleum minister Hardeep Singh Puri had said that oil marketing companies were incurring daily losses of Rs 1,000 crore, adding that it was not sustainable in the long run. With disruption in the key energy passage, the Strait of Hormuz, continuing and global crude prices still hovering 50% above pre-conflict levels, countries across the world have increased petrol and diesel prices by 20-80%.
The government's clarification comes amid rising global crude oil prices due to geopolitical tensions in West Asia. The under-recoveries, which represent the difference between the cost of production and the selling price, have been a burden on OMCs. Despite the recent price hike, the losses remain substantial.
Impact on Consumers and Economy
The sustained under-recoveries could lead to further price adjustments, though the government has not indicated any immediate plans. The situation highlights the delicate balance between protecting consumers from high fuel prices and ensuring the financial health of state-owned oil companies. Analysts suggest that if crude prices remain elevated, additional hikes may be inevitable.
