Oil firms suffer over Rs 8,000 cr loss in Q2

State-owned fuel retailers, whichlast week raised petrol price by Rs 1.80 per litre, reported a net loss of overRs 8,000 crore in July-September quarter and are borrowing heavily to even buycrude oil.

Hindustan Petroleum (HPCL) last week posted a net loss of Rs3,364.48 crore in the second quarter while Bharat Petroleum (BPCL) reported anet loss of Rs 3,229.27 crore.

Indian Oil (IOC), the nation's largest fuel retailer, willdeclare quarterly results on Wednesday and analyst estimate a net loss in therange of Rs 1,650 crore to Rs 5,000 crore.

The losses reported in the quarterly earnings are primarilybecause they lose Rs 333 crore per day on selling diesel, kerosene and domesticLPG at rates which are way below cost of production.

On top of these, they had accumulated a loss of Rs 2,468crore on selling petrol, a commodity which was decontrolled or freed fromgovernment control in June last year. Mounting losses due to rupee dippingbelow Rs 49 to a dollar from Rs 45-46 earlier this fiscal, led to the fifthhike in petrol price this fiscal.

The losses on fuel sales mean the companies did not generateenough cash to buy crude oil (raw material for making fuel). The shortfall isbeing met through borrowings, which currently stand at a unprecedented Rs119,282 crore and equals a fourth of India's borrowing target of Rs 4.7 lakhcrore for 2011-12 fiscal.

Oil Minister S Jaipal Reddy had last week stated thatunder-recovery (revenue loss) on diesel, LPG and kerosene will total to awhopping Rs 132,000 crore for the full fiscal and unless these are made good,the retailers would be bankrupt.

The government till last year met at least half of these byway of cash subsidy and another one-third came from oil and gas producers likeONGC.

ONGC, which reported a net profit of Rs 8,642.23 in thesecond quarter, has already protested against government move to raise itsshare of subsidy saying its Rs 170,000 crore investment target for the 12thFive Year Plan period (2012-17) would be jeopardised.