State run marketing companies including Indian Oil and Bharat Petroleum have warned that they may not be able to meet demand for fuel unless the Government either raises fuel prices or compensates them for losses. The companies have license to raise gasoline prices, but sales of kerosene and cooking gas have caused them to lose money. Diesel prices are also well below international levels and executives have said that the situation, coupled with tighter credit conditions, could lead to serious difficulties.
"The government has still not paid us [the] promised subsidy for the first quarter. We are forced to borrow but if the current situation continues, the banks will stop lending us money. This will hurt fuel supply," said the Chairman of one state-run marketing company, speaking on condition of anonymity, to local newspaper Economic times.
The three state-run firms - Indian Oil, Bharat Petroleum and Hindustan Petroleum – have combined borrowings of over 120,000 crore. In the first quarter of the year, they suffered a combined loss of 9,361 crore. Since then, the Government has approved modest price hikes and cut taxes on fuel. However, Indian Oil recently announced that it would have to raise its borrowing limit to 110,000 crore from its current level of 80,000 crore. The company is projected to lose 64,010 crore this year.
PetrolWorld 24102011
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