Oil retailers weigh supply cuts to stem rising losses

State-owned oil companies have warned of reductions in fuel supplies to limit losses that have grown to Rs48 crore per day if they are not allowed to raise prices. With crude prices ruling above $125 a barrel, the share of crude in the cost of production have increased to 93 per cent, leaving no space for tem to reduce costs.

"The situation is very critical. We are losing Rs7.67 per litre on petrol and after adding 20 per cent sales tax, the desired increase in rates in Delhi is Rs9.20 per litre," Indian Oil Corp (IOC) chairman R S Butola said.

"Our 93 per cent of cost of production is on account of crude oil, which we have to import. If we don't earn revenues from fuel sales, we would not be able to buy crude oil and if we are unable to buy crude, there will be fuel supply disruptions," Butola said.

"This is a peculiar scenario where the central government earns Rs14.78 on every litre of petrol sold (in excise duty) and states governments get anything between Rs10 to 20 a litre. But the oil companies are not allowed to earn anything," Butola said.

The Petroleum Planning and Analysis Cell (PPAC) under the ministry of petroleum and natural gas has reviewed international prices of crude oil and petroleum products during the second fortnight of March 2012.

Accordingly, the under-recovery on high-speed diesel, which is price-controlled, has increased to Rs14.36 a litre effective 1 April 2012,