Sunday, March 25, 2012

India's Oil Marketing Companies bleeding with losses

The Indian government is under pressure from oil marketing companies (OMCs) to raise the prices of petrol. The government had decontrolled petrol prices in June 2010. However, this was done only on paper. OMCs like Oil India, Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) still need Government's approval before raising petrol prices. Due to the state assembly elections, the OMCs were not able to raise petrol prices since December 2011, during which oil prices have increased by 11%. As a result OMCs are losing around Rs.4.86 bn a day on account of selling petroleum products at government-mandated prices. This trend cannot continue for long. The government is however still unsure of raising petrol prices and ruled out decontrolling diesel prices. OMCs would have to raise petrol price by about Rs 7.72 a litre to compensate for their losses. The government will have to bite the bullet on petrol prices sooner or later, otherwise the OMCs will bleed to death.

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