IOC wants Rs 8 per litre petrol price hike, or a duty cut

New Delhi: Indian Oil Corporation (IOC) on Tuesday threatened to increase petrol prices by Rs 8.04 a litre unless the government cuts down duties on the fuel and provides 100 percent cash compensation to oil marketing companies for under-recoveries (a euphemism for losses).

In a statement, IOC asked government to declare petrol as a regulated product temporarily and provide 100 percent cash compensation to OMCs (oil marketing companies) or reduce excise duty (at Rs 14.78 per litre) by an amount equivalent to the under-recoveries. State governments should simultaneously be advised to reduce sales tax (which varies from 15-33 percent, or Rs 10.30-18.74 per litre), IOC said.

The OMCs’ inability to hike petrol prices since December 2011 has resulted in total under-recoveries of Rs 1,036 crore (Rs 2,287 crore for all OMCs). The under-recoveries in the last fiscal stood at Rs 2,236 crore (Rs 4,859 crore for all OMCs).

[caption id=“attachment_278892” align=“alignleft” width=“380” caption=“IOC asked government to declare petrol as a regulated product temporarily and provide 100 percent cash compensation to OMCs.AFP”] [/caption]

The last price revision happened on 1 December 2011 when IOC raised prices by Rs. 0.65 per litre on top of an earlier price reduction of Rs 1.85 per litre in November. The company pointed out that international crude prices have jumped since then and stand at $132.45 per barrel in the current pricing period.

“This is much higher than the price of $109.03 per barrel at which Indian Oil and other OMCs are selling petrol (excluding state levies). The company should have increased the petrol price by Rs 1.89 on 1 January this year; Rs 4.08 on 16 January, 2012; Rs 3.13 on 1 February, 2012, Rs 3.47 on 16 February, 2012, Rs 5.09 on 1 March, 2012; Rs 6.43 on 16 March and Rs 7.66 on 1 April. The increase now called for is Rs 8.04 per litre (excluding state levies),” it said.

At present, OMCs import crude oil at $121.29 per barrel (relevant for the second fortnight of April 2012) and sell at $109.03 per barrel, which IOC said is not sustainable.