Crude oil prices have fallen the most globally among all commodities since the start of this fiscal. However, the positives for India are limited because of the rupee's slide. Although petrol prices were recently realigned with costs, the industry’s under-recoveries are poised to top . 170,000 crore for FY13, unless diesel, LPG and kerosene prices are revised.
Data compiled by the Petroleum Planning and Analysis Cell, or PPAC, shows that the cost of India’s crude oil basket fell to $98.1 in the first week of June 2012 after staying above $100 for over six months.
However, a weak rupee means that India’s cost of imports in rupee terms at . 5,445 per barrel was the lowest only since February 2012. After reaching a peak of . 6,230 per barrel in March ’12, it has gradually declined to . 6,110 in April and . 5,906 in May.
Oil companies raised petrol prices recently, yet they continue to be weighed down by major under-recoveries on diesel, LPG and kerosene. The petroleum ministry estimates industry losses at . 12.53 per litre on diesel, . 30.53 per litre on kerosene and . 396 per cylinder of LPG — which no doubt have eased a bit compared to a couple of months ago, but still remain dangerously high.
For the entire industry, these under-recoveries are estimated at . 457 crore daily for the first fortnight of June ’12, down 11.3% from . 514 crore daily in May ’12. At this rate, the total underrecoveries for the ten month period June 2012 – March 2013 of FY13 would work out to . 137,100 crore. If the under-recoveries for the past two months – April and May – are also taken into account, the whole year’s under-recoveries would be close to . 170,000 crore.
India imports 83% of its crude oil requirements annually. The country’s provisional crude oil import during 2011-12 was 172.11 million tonne. This was 5% more than the crude oil import of 163.59 MMT in 2010-11. A total of 204.8 MMT crude oil was processed by Indian refiners in 2011-12 against 196.5 MMT in 2010-11.
There are already indications that the slide in world oil prices may not continue further. Saudi Arabia has hinted at scaling down its output, while raising official selling price of its main Arab Light grade from July onwards. At the same time, Iran’s talks with the UN Security Council members are dragging on without any definite solution in sight.
Against this backdrop, the rising under-recoveries of the petroleum sector and also the subsidy burden for the national exchequer are worrisome. Any step by the government to address this issue will have a positive impact on the country’s currency as well as sovereign ratings.
Data compiled by the Petroleum Planning and Analysis Cell, or PPAC, shows that the cost of India’s crude oil basket fell to $98.1 in the first week of June 2012 after staying above $100 for over six months.
However, a weak rupee means that India’s cost of imports in rupee terms at . 5,445 per barrel was the lowest only since February 2012. After reaching a peak of . 6,230 per barrel in March ’12, it has gradually declined to . 6,110 in April and . 5,906 in May.
Oil companies raised petrol prices recently, yet they continue to be weighed down by major under-recoveries on diesel, LPG and kerosene. The petroleum ministry estimates industry losses at . 12.53 per litre on diesel, . 30.53 per litre on kerosene and . 396 per cylinder of LPG — which no doubt have eased a bit compared to a couple of months ago, but still remain dangerously high.
For the entire industry, these under-recoveries are estimated at . 457 crore daily for the first fortnight of June ’12, down 11.3% from . 514 crore daily in May ’12. At this rate, the total underrecoveries for the ten month period June 2012 – March 2013 of FY13 would work out to . 137,100 crore. If the under-recoveries for the past two months – April and May – are also taken into account, the whole year’s under-recoveries would be close to . 170,000 crore.
India imports 83% of its crude oil requirements annually. The country’s provisional crude oil import during 2011-12 was 172.11 million tonne. This was 5% more than the crude oil import of 163.59 MMT in 2010-11. A total of 204.8 MMT crude oil was processed by Indian refiners in 2011-12 against 196.5 MMT in 2010-11.
There are already indications that the slide in world oil prices may not continue further. Saudi Arabia has hinted at scaling down its output, while raising official selling price of its main Arab Light grade from July onwards. At the same time, Iran’s talks with the UN Security Council members are dragging on without any definite solution in sight.
Against this backdrop, the rising under-recoveries of the petroleum sector and also the subsidy burden for the national exchequer are worrisome. Any step by the government to address this issue will have a positive impact on the country’s currency as well as sovereign ratings.
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