No financial bailout planned for OMCs to cover losses on petrol, diesel, ATF: Senior official

New Delhi: The government does not plan to compensate state-run Oil Marketing Companies (OMCs), Indian Oil, Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL), for the losses they are booking on sales of petrol, diesel and aviation turbine fuel, an official said on Monday. "There is no proposal before the government to support oil marketing companies (for their losses)," said Sujata Sharma, Joint Secretary in the Ministry of Petroleum and Natural Gas.

Sharma said the government’s approach is aimed at containing inflation rather than cushioning oil companies’ margins.

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State fuel retailers are carrying the burden

Indian Oil Corporation, BPCL and HPCL have been selling petrol and diesel below cost after retail prices were left unchanged for four years, even as crude costs climbed sharply after the West Asia conflict. The pressure has now spread to jet fuel as well. For the first time in more than two decades, the companies have begun posting losses on Aviation Turbine Fuel (ATF) after they passed on only part of the increase needed to domestic consumers.

Domestic airline ATF was increased by 25 percent last month, but that was only a fraction of the desired rise, and there was no change in May. Petrol and diesel prices have also remained frozen despite under-recoveries of Rs 25-28 a litre.

LPG relief has not closed the gap

Domestic LPG prices were raised by Rs 60 per 14.2-kg cylinder on March 7, but the revision did not fully offset higher costs. As a result, oil companies are still booking under-recoveries. The government has previously used budgetary subsidy support to cover LPG losses, but no fresh support has been announced this time.

Sharma said there has been no increase in retail prices of petrol, diesel or domestic LPG even though supplies have been disrupted by the war in West Asia. Only bulk diesel and commercial LPG have been raised.

"Every effort has been made to protect the consumers (by not raising retail prices). Consumer interest has been kept in mind when deciding on the revision," she said.

Price increases were limited to non-retail users

The latest monthly revision on May 1 lifted the price of aviation turbine fuel for international airlines by USD 76.55 per kilolitre, or 5.33 percent, to USD 1,511.86 per kl. That came after a sharp jump in April, when the rate more than doubled to USD 1,435.31 per kl.

Commercial LPG, used by hotels and restaurants, was increased by Rs 993 to a record Rs 3,071.50 per 19-kg cylinder. The 5-kg FTL or market-priced LPG cylinder rose from Rs 549 to Rs 810.50 per bottle.

That puts the smaller 5-kg cylinder just below the Rs 913 price of the 14.2-kg domestic LPG cylinder used in households.

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Bulk diesel, used by industrial consumers such as telecom towers, was also raised from about Rs 137 per litre to over Rs 149 a litre. That remains well above the Rs 87.62 per litre retail pump price for diesel.

Domestic airline ATF will continue to be priced at Rs 1,04,927.18 per kl, with state-owned oil firms absorbing the rise in global fuel prices to shield airlines and consumers.

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