(EnergyAsia, May 30, Friday) — Forced to sell fuel at below market prices, India’s state-owned oil retailers warn they will run out of money to pay for crude imports as early as July unless the government allows them to sharply raise prices.
The government has long ignored the industry’s warnings for years that they cannot carry on subsidising domestic fuel consumers. The situation has deteriorated sharply in recent months since crude oil surged past US$100 a barrel on the first trading day of 2008.
As crude broke through US$135 a barrel on May 21, the oil companies may have finally got the attention of the Petroleum Minister and his senior officials, who have finally agreed to lobby their case with the Prime Minister.
Two downstream companies, Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL), have enough cash to pay for imports only till end-July while Indian Oil (IOC) will be able hold out till mid-September. Under orders from the government, all three companies have been borrowing to maintain their retail operations despite the mounting losses.
IOC chairman Sarthak Behuria said it may consider selling part of its lucrative investments in upstream company ONGC and gas company Gail to raise funds to pay for crude imports and maintain its losing retail business.
India’s crude oil import bill surged by more than 40% to $68 billion in the last financial year to March 31 2008, said the Ministry of Petroleum and Natural Gas.
India imported 121.672 million tons of crude oil last year, up from 111.502 million tons in FY 2006.
Despite the massive expansion in its domestic refining capacity, India also imported 22.716 million tons of products such as naphtha, liquefied petroleum gas and kerosene for $15.255 billion. This compares with its 17.66 million tons of product imports for $9.968 billion the previous year.