"There is no proposal to reduce fuel prices. We have to watch (the) situation for a few more weeks," said S Sundareshan, Additional Secretary in the Oil Ministry in Delhi. The basket of crude India buys yesterday averaged at $56.72 per barrel, a level at which state-run Bharat Petroleum, Indian Oil and Hindustan Petroleum would break even if global prices were to stabilise for a month.
"Price reduction cannot be on the basis of price of one or two days. On Tuesday it was at $56, today it has gone up (again) by two dollars. We need prices to stabilise before we can think of a price reduction," he said.
The three firms, which in April-September reported a Rs 92,853 crore revenue loss (audited figure) on sale of petrol, diesel, LPG and kerosene, are likely to post bad results when they report on quartely earnings over the next two days.
"Prices need to stabilise for four weeks (at current level) for us to consider a price cut," Sundareshan said.
A sharp depreciation in the value of Indian rupee against the US dollar has wiped away some of the gains from falling international crude oil prices. The three firms were to break even on fuel sales at $67 per barrel crude oil when one USD was equivalent to 41 Indian rupees.
However, with rupee at the 50 mark, the break even point has now shifted to $57 per barrel. Retailers sell petrol at a loss of Rs 2.85 a litre, diesel at Rs 7.26, kerosene at Rs 29.19 per litre and domestic LPG at a loss of Rs 333 per cylinder.
IOC, BPCL and HPCL in April-September lost Rs 92,853 crore on fuel sales (audited figures) and are projected to lose Rs 1,47,486 crore in the full fiscal. Another Petroleum Ministry official said cutting fuel prices at this stage would widen the revenue loss of state-run firms. "I do not see a trigger, unless political, for a reduction in fuel prices."
"For a price cut to happen, international oil prices have to sustain at levels lower than the break even point, for at least a month. We cannot be seen lowering the prices on one day's fluctuations. Tomorrow, if the prices go up, will the oil companies be allowed to raise prices," he said.
Deora is believed to have met Prime Minister Manmohan Singh on the issue last week and had been advised to wait for global oil prices to fall further before taking the issue to the Cabinet.
Every time the US dollar becomes dearer by one rupee, the revenue loss on fuel sales jumps by Rs 8,500 crore.