|And the pumps run dry …|
|Friday, 11 November 2011 00:00|
And the pumps run dry …
Perhaps Mamatadi should read IOC’s balance sheet
If Indian Oil chairman RS Butola is to be believed, and you only have to look at his balance sheet to know he’s telling the truth, fuel pumps across the country may start running dry as early as next month. Announcing IOC’s worst-ever performance, Butola said banks may not lend him money to buy crude oil—borrowings have surged to R73,296 crore thanks to a net Q2 loss of R7,486 crore due to the government not able to compensate for its losses of R11,757 crore by selling diesel/kerosene/LPG below cost. Nor is IOC the only PSU oil marketing companies (OMCs) to be making losses—HPCL and BPCL’s combined losses were R6,500 crore for the quarter. Despite the hike in petrol prices, and the furore created by everyone, oil PSUs are still losing R319 crore per day by under-pricing LPG by R260.5 a cylinder, kerosene by R25.7 a litre and diesel by R8.6—that’s R1,16,435 crore on an annualised basis.
What’s made things worse, apart from the refusal to hike LPG/kerosene/diesel prices and not paying the government’s share of the losses to the oil PSUs, is the change in the funding pattern of these under-recoveries. The share of under-recoveries of OMCs met through issue of oil bonds and cash assistance by the government has steadily gone down from 69% in 2008-09 to 52% in 2010-11 and further 34% in the first quarter of 2011-12. Consequently, the under-recovery burden that has devolved on the OMCs has steadily shot up from R5,621 crore in 2009-10 to R6,893 crore in 2010-11 and further to R14,018 crore in the first quarter of 2011-12.
The only way out of the crisis is to (a) lean on PSU banks to give IOC/HPCL/BPCL loans even though they’re not credit-worthy; (b) let NPLs of banks rise since Moody’s has lowered their outlook anyway!;(c) raise prices of LPG/kerosene/diesel and incur Mamata Banerjee’s wrath—when petrol prices were raised a few days ago, she said she’d walk out of the UPA if there was any more increase. The other option is to incur the voter’s wrath when the fuel pumps start running dry. The choice seems pretty clear.