A fuel pump stands at an Indian Oil Corp. gas station in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Oil Companies Will Not Recoup Losses From Re 1 A Litre Subsidy On Petrol, Diesel

State-owned oil firms have no plans to recoup losses they made on subsidising petrol and diesel by Re 1 per litre even though rates have now become at par with the cost, top officials said.

Scrambling to contain spiraling prices, the government on Oct. 4 last year cut excise duty on petrol and diesel by Rs 1.50 per litre each and asked public sector undertaking oil firms to absorb another Re 1 a litre. This immediately resulted in a Rs 2.50 per litre decline in prices which had touched an all-time high on rising international rates.

"We are not recovering any of the losses," Indian Oil Corporation Ltd. Chairman Sanjiv Singh told reporters. IOC along with Hindustan Petroleum Corp Ltd. and Bharat Petroleum Corp Ltd. took a hit of about Rs 4,500 crore from absorbing Re 1 a litre hike.

"When prices were going up, the government requested us to consider absorbing Re 1 per litre and we lowered the price by Re 1 per litre," he said. "But subsequent to that rates have been on the decline which we have passed on to consumers on each single day." The hit, he said, was a "one day affair".

He said since mid-October petrol price has fallen by Rs 14.18 per litre and diesel by Rs 13.03 per litre. "We passed on all of the decline in international prices to consumers."

HPCL Chairman and Managing Director MK Surana said retail prices are now at par with their benchmark international fuel rates. "The decision to absorb Re 1 per litre was a temporary and since then rates have leveled with their base price," he said.

Both Singh and Surana said there is no decision to recoup any of the losses the companies had suffered.

Petrol costs Rs 68.65 a litre in Delhi and diesel is priced at Rs 62.66. Petrol prices, which have been on a decline since Oct. 18 except for one day, are at their lowest level in almost 13 months. Diesel rates are at their lowest since March 2018.

Petrol price had touched a record high of Rs 84 per litre in Delhi and Rs 91.34 in Mumbai on Oct. 4. Diesel on that day had peaked at Rs 75.45 a litre in Delhi and Rs 80.10 in Mumbai. Prices had started to climb from Aug. 16.

Between Aug. 16 and Oct. 4, petrol price was hiked by Rs 6.86 per litre and diesel by Rs 6.73 per litre.

As the international oil prices continued to rise, price of petrol and diesel in Delhi increased to Rs 82.83 and Rs 75.69 on Oct. 17. In Mumbai, rates touched Rs 88.29 a litre for petrol and Rs 79.35 for diesel. But since then, international oil prices have been falling and rupee has also appreciated, resulting in a decline in retail rates.

During the last two and half months, petrol price rose on just one day -- by 10 paise on Dec. 18. Diesel rates rose on Dec. 17 and 18 by 9 paise and 7 paise respectively.

Both Singh and Surana said prices are likely to continue to be soft in the near future.