State-run Indian oil retailers will run out of money to cover crude imports within a few months unless the government announces a rescue package soon, a senior oil ministry source said on Tuesday.
The firms are losing millions of dollars each day as they must sell their fuel at discounted rates set by the government far below oil’s surge to above $135 on the world market. They have appealed for price hikes and duty cuts.
On Tuesday, Taiwan joined Asian nations Indonesia and Sri Lanka in deciding to raise fuel prices as they can no longer afford to shield consumers from soaring crude oil prices.
"At this rate, Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) can only pay for imports till end- July. Indian Oil (IOC) can only sustain till mid-September," the official, who did not wish to be identified, told reporters.
The three firms plans to raise their borrowing limits, but the official said: "This is not a long-term solution. For how long can you continue to run like this?"
While IOC seeks to double its borrowing limits to 800 billion rupees (nearly $18.7 billion), HPCL and BPCL are also planning to raise their current limits from 200 billion rupees.
HPCL’s director for finance said last week the company was in talks with bankers to raise its borrowing limit.
FUEL PRICE HIKE
The oil ministry has been pitching for a hike of five rupees a litre in the price of diesel, 10 rupees a litre for petrol and a 50-rupee increase in the price of a cylinder of cooking gas.
Analysts say ministers are likely to tone down the proposal to raise fuel prices by 15-20 percent given that inflation is already at 8 percent, a three and a half year high.
The oil ministry is also seeking zero customs duty on crude oil, reducing import duties on petrol and diesel to 2.5 percent from 7.5 percent and halving the excise duty on the two fuels.
Oil minister Murli Deora on Tuesday met Finance Minister Palaniappan Chidambaram, Foreign Minister Pranab Mukherjee, who is also chairman of a ministerial panel on fuel pricing, and Prime Minister Manmohan Singh to discuss ways to stem the losses of oil firms.
The official said oil retailers’ revenue loss worked out at an annual 2,250 billion rupees ($79.59 billion) if the Indian crude basket continued to hover at $125 a barrel.
Even with a proposed government package and other measures including issuing oil bonds, "a gap of 510 billion rupees is still left," the official said.
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