Oilcos make profit, no price cut yet

State-owned oilmarketing companies have started making profit on motor fuel sales in more than a year which will strengthen the hands of  UPA’s political managers who have been pushing for a reduction in fuel prices since crude started sliding from its mid-July peak of $147 a barrel.

With crude ruling at nearly one-third of that peak, oilmarketing firms have started making profit of 70 paise a litre on diesel from November 1. Till then, they were losing about 96 paise on the fuel. Similarly, profit on petrol has risen to Rs 9.86 per litre from a little over Rs 4 they were making in the fortnight ending October 31.

No wonder, there has been a shift in PM Manmohan Singh’s stand on the issue. “All options are open (on a price-cut),” he told journalists on his way back from the G-20 meeting. Only last week, while returning from his West Asia visit, he had been categorical in ruling out any immediate reduction in pump prices on the ground that there were still uncovered losses on kitchen fuel sales.

The idea behind the PM’s earlier stand echoed by oil minister Mulri Deora was to lower the oilmarketing companies’ overall losses, which would reduce the amount that government will have to underwrite with IOUs to them as oil bonds. At present crude levels, the companies are expected to end 2008-09 with Rs 122,710 crore losses, Rs 92,853 crore of which has already been accounted for in the first half of the fiscal. The shift in the PM’s statement on Sunday, then, marks the ground reality as polls near.

Indeed, Deora of late has been under tremendous pressure from his party managers to affect a reduction. For a government ceaselessly being hammered by the rising cost of daily living, stock market crash and now liquidity crunch, the party managers strongly argue that a marginal cut in fuel prices may be just the prescription needed to prop up the coalition’s prospects in the poll season. READ AT TIMES OF INDIA

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