India is heading towards an unprecedented oil-shock, with under-recovering quadrupling over last year — according to early numbers from the ministry of petroleum and natural gas.
With crude oil prices almost regaining their all time high of 3 years ago, India’s state-owned oil companies are heading towards a record breaking ‘oil shock’ year.
“The Oil marketing companies [Hindustan Petroleum, Indian Oil and Bharat Petroleum] are currently incurring daily under-recovery of Rs.490 crore on the sale of Diesel, PDS (rationed) Kerosene and Domestic LPG,” the ministry warned in an interim update on the situation.
At Rs 490 crore a day, the three companies will lose a whopping Rs 1.79 lakh crore this year, assuming that oil prices will break their relentless two-year rising streak very soon.
The price of crude oil, effective for Indian buyers, has gone from around $35 per barrel two years ago and $75 a year ago to $120 per barrel at present. The all time record for oil prices was 2008 April when they crossed $130 per barrel – setting the scene for the global economic turmoil that was to follow.
The highest under-recovery, recorded so far, has been just Rs 1.07 lakh crore in 2007-08 and this year’s project is around 63% higher. This year’s number is also exactly four-times the last year’s number of Rs 46,051 crore.
Not only will the government be hard-pressed to find the money to fund the gaping hole in the oil companies’ finances, consumers are already suffering under the highest fuel prices India has ever seen.
Petrol prices has been one of the fastest growing items in India’s price indices for the last one year, increasing 15% or more year-over-year while the overall trend has been a 9% increase.
Responding to mounting under-recoveries – caused due to the Government not allowing companies to raise prices of petro-fuels, government had freed petrol from the ‘controlled price’ mechanism – resulting in frequent increases of its retail price – now at around $1.4 per litre.