Oil PSUs brace for tough times as crude prices snap up

Public sector oil refining companies in the country are gearing up for tough times ahead in 2010-11 with fuel losses expected to hit Rs90,000 core in the current crude oil price rally.

According to an oil sector executive quoted by Business Line, if crude continued to stay in the $80-85 price band, there could be big trouble for the industry this fiscal.

However, a plus factor is the  stronger rupee, which could soften the impact though losses would still be over Rs85,000 crore if crude oil did not fall to sub-$80 levels.

Public sector refiners, IndianOil, Hindustan Petroleum Corporation and Bharat Petroleum Corporation sell petrol, diesel, LPG and kerosene at subsidised prices. The losses, also termed under-recoveries, are compensated for through a package where each party involved right from the centre to upstream oil majors like the Oil and Natural Gas Corporation pick up a part of the tab.

Hence, even as they gird up for a difficult fiscal, the three oil majors have still no idea of the proposed compensation package for 2009-10 totalling nearly Rs20,000 crore. The finance ministry too seems to be in no hurry to offer anything beyond the Rs12,000 crore given in the third quarter of last fiscal.

IOC, HPCL and BPCL reported profits in the October-December period due to this payout, but the fourth quarter of 2009-10 will likely leave the three refiners in the red to the tune of around Rs10,000 crore.