To protect the interests of the common man and to pass the benefit of fall in international oil prices the Government of India has decided, as an interim measure, to reduce the price of Petrol by Rs.5 per litre and Diesel by Rs.2 per litre with effect from 6.12.2008. The Government is closely watching the international oil prices and their impact on the country’s economy, and will take appropriate decisions whenever necessary.
The year 2008-09 has witnessed unprecedented volatility in international oil prices. The price of Indian basket of crude oil reached its highest level of $142/barrel on 3.7.2008. From the month of August 2008, there has been a decline in international crude oil prices. However, the average price of Indian basket of crude oil during 2008-09 (April- 4th December’08) still remains quite high, at $101.40/barrel.
Under-recoveries on PDS Kerosene and Domestic LPG continue at Rs.16.60 per litre and Rs.142.67 per cylinder respectively and hence, there would be no change in the prices of these two products.
In spite of the recent letup in oil prices, the public sector OMCs have already incurred under-recoveries of Rs.92,853 crore during April-Sept. 2008 on the sale of Petrol, Diesel, PDS Kerosene and Domestic LPG. As a result, they declared combined losses of more than Rs.14,000 crore during April-Sept. 2008. There have been additional factors adversely affecting their financial health such as the high interest burden because of heavy borrowings at high interest rates, foreign exchange losses due to the depreciation of the Rupee, inventory losses, drop in gross refining margins, etc. At current international prices and the revised retail selling prices, the under-recoveries projected for 2008-09 are approximately Rs.1,10,000 crore.
A formula would be worked out to deal with the issue of under-recovery.
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