No respite for OMCs...

 

 

The government has finally announced to cut down auto fuel prices thus bringing back smiles on the face of general consumers. This is being done to pass on the steep fall in international crude prices to consumers. The retail selling price of petrol has been brought down by Rs. 5 per litre and diesel by Rs 2 per litre. However, there is no change in the prices of cooking fuels like LPG and Kerosene. While on one hand these price cuts, no doubt, would eventually lead to a collective savings of around Rs 6,000 crore for auto fuel consumers, on the other OMCs that include IOC, BPCL, HPCL will have to bear an additional burden of Rs 5,300 crore. In fact, the revised retail prices of oil would lead the OMCs to suffer under-recoveries to the tune of Rs 1,10,000 crore in the current financial year. Further adding to the woes of the OMCs (apart from incurring losses) the factors that would adversely pull down the bottom lines of these fuel retailers include high interest burden due to heavy borrowings at high interest rates, rupee depreciation leading to foreign exchange losses, inventory losses and drop in gross refining margins. Thus, the Government has been caught in the twin dilemma again.