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Petrol price hike: Oil firms warn of disruptions in fuel supply

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Sports Car designer Ferdinand Alexander Porsche, with a Porsche 911 Carrera
Sports Car designer Ferdinand Alexander Porsche, with a Porsche 911 Carrera

State-owned oil companies on Monday warned of disruptions in fuel supplies if they are not allowed to raise petrol price or compensated for the Rs 48 crore per day loss they incur on selling fuel below cost.

"The situation is very critical. We are losing Rs 7.67 per litre on petrol and after adding 20 per cent sales tax, the desired increase in rates in Delhi is Rs 9.20 per litre," Indian Oil Corp (IOC) Chairman R S Butola told reporters said.

"Our 93 per cent of cost of production is on account of crude oil, which we have to import. If we don't earn revenues from fuel sales, we would not be able to buy crude oil and if we are unable to buy crude, there will be fuel supply disruptions," he said.

IOC and other oil PSUs, Bharat Petroleum and Hindustan Petroleum are losing Rs 48 crore per day on sale of petrol, whose pricing was decontrolled by the government in June 2010.

But the government hasn't allowed the oil companies to hike petrol price.

"This is a peculiar scenario where the central government earns Rs 14.78 on every litre of petrol sold (in excise duty) and states governments get anything between Rs 10 to 20 a litre. But the oil companies are not allowed to earn anything," Butola said.

Oil PSUs have asked government to make good the losses they incur on selling petrol if retail selling price of the fuel are not to be increased. Also, they have demanded a cut in the excise duty on petrol.

"We had clearly told the government that if these demands are not accepted, then oil companies will have no option but to raise petrol prices," he said. "We haven't so far heard from the government."

Indian Oil, Hindustan Petroleum and Bharat Petroleum review retail prices at the end of every fortnight.