OMCs may seek Government intervention over fuel under recoveries | Exclusive

India's Oil Marketing Companies are mulling government intervention as they are weighed down by fuel under recoveries. Sources tell CNBC-TV18 that the combined under recoveries for LPG and fuel stands at over Rs 1 lakh crore.

The three major OMCs - Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum are likely to approach the government soon, according to the sources.

Under recoveries is the gap between the cost and the selling price of fuel. In case the selling price is lower than the cost price, higher is the under recoveries.

Only two weeks earlier, the Union Cabinet had approved a one-time grant of Rs 22,000 crore to the state-run refiners for losses incurred in the domestic LPG business.

However, there is no call for direct fiscal support to the companies as fuel prices are deregulated.

Here are the losses reported by OMCs during the April-June period as they could not revise petrol and diesel prices higher, in-line with higher costs to curb inflation:

HPCL: Rs 10,196 crore

BPCL: Rs 6,291 crore

IOC: Rs 7,485 crore

Industry sources tell CNBC-TV18 that a diesel price hike of at least Rs 10-15 per litre is needed to make up for the under recoveries.

Another option that could be considered is that of a cut in excise duty only for the company, without a pass through for the customer. The government in May cut excise duty on petrol and diesel which was passed on to consumers instead of being used to square off mounting losses on the two fuel sales.

Sources also say that price hikes may be considered next year to make up for the losses. The prices are currently at a freeze in order to help the government combat inflationary pressures.