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Plunging crude prices offset by Re's dive

Plunging crude prices have been offset by Re's dive & shooting interest rates.

, ET Bureau|
Oct 02, 2008, 04.06 AM IST
NEW DELHI: The softening of global crude oil prices from $147 per barrel in July to $100 per barrel has failed to bring cheer to the public sector refiners: Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp(HPCL).

Gains of a dip in crude oil prices have been neutralised by the rupee���s depreciation and rising interest rates. Despite a fall in the global oil prices, the three PSUs are estimated to post a total under-recovery bill of Rs 1,62,158 crore in 2008-09.

���A Re 1 increase (vis-��-vis the dollar) would mean an annual impact of Rs 8,000 crore for us,��� an oil company official said. The under-recovery of the oil companies was estimated at Rs 1,80,000 crore when the exchange rate was Rs 42.50 (for $1), which is now Rs 47.

The oil companies��� net gain due to a decline in the crude oil price after adjusting the exchange rate is estimated at Rs 10,000-12,000 crore for the fiscal year.

When other costs, such as credit crunch and a higher cost of borrowing, are taken into account, this number further shrinks, experts in oil companies said. Cash-strapped public sector oil companies are paying high interest rates on their borrowings that have gone up 300-350 basis points compared to the previous financial year.

���However, softening of global crude oil prices in the last couple of months was a major relief for oil companies, otherwise their under-recoveries would have been unmanageable,��� an oil ministry official said.

The average price of crude imported by India ��� a k a Indian basket ��� has come down to $ 116.60 per barrel from $119 per barrel in April 1-September 15. Average price of crude oil (Indian basket) for September 2008 was $96.81 per barrel compared to $113.05 in August 2008.

���The trend is encouraging but the government may consider a downward price revision only after the average crude oil price (for at least 15 days) touches $67 per barrel,��� an official said.

Petroleum ministry officials say the political pressure may, however, force the government to change its stand. It is speculated the government could revise prices of petrol, diesel and cooking gas in the light of forthcoming general elections.

The government���s firm stand would depend on petroleum minister Murli Deora, who has so far been against slashing prices of sensitive petroleum products: petrol, diesel, PDS kerosene and domestic LPG.

He rules out a price revision at this stage due to poor financial condition of public sector oil companies. The trio is still losing Rs 12.95 per litre on diesel, Rs 5.57 per litre on petrol, Rs 29.19 per litre on PDS kerosene and Rs 335.03 on every cooking gas (LPG) cylinder.
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