Govt oil firms face risk of Rs 1 lakh crore loss due to high crude prices : Hardeep Singh Puri

Oil Minister Hardeep Singh Puri on Tuesday (May 12) warned that state-run fuel retailers face the dire prospect of a whopping Rs 1 lakh crore loss in a single quarter if elevated crude prices persist and retail fuel prices remain unchanged.

Daily loss of Rs 1,000 crore

Further elaborating on the severity of the situation, the Union Minister stated that the state-run oil companies were incurring a daily loss of Rs 1,000 crore.

Also Read: Govt mulls fuel price hike as India faces mounting losses amid Gulf conflict: Report

However, Puri, speaking at the CII's Annual Business Summit, also said that with two months of fuel stockpiles, India faces no supply concerns despite disruptions to global energy flows.

The minister further stated that at some stage an assessment needs to be made on how long retailers can sustain losses from selling petrol, diesel and cooking gas LPG below cost, but refused to speculate if rates would be raised anytime soon.

‘No supply-side problems’

"We have no supply-side problems," the minister said at CII's Annual Business Summit here, adding that India began the crisis with "more than enough" crude oil and LPG inventories and had since ramped up domestic LPG production to 54,000 tonnes per day from about 36,000 tonnes previously.

Also Read: Centre assures of no fuel shortage, after PM Modi's conservation appeal

At the same time, the minister acknowledged growing fiscal stress from keeping retail fuel prices unchanged.

"My oil companies are losing Rs 1,000 crore a day," he said, adding that cumulative under-recoveries had climbed to nearly Rs 1.98 lakh crore and that a single quarter of losses of Rs 1 lakh crore could wipe out the sector's annual profits.

Pressure on retailers

Ten weeks into the West Asia conflict, India’s state-owned oil marketing companies have managed to maintain uninterrupted supplies of petrol, diesel and domestic cooking gas, even as global crude prices remain elevated and several economies battle shortages, rationing and steep retail price hikes.

Also Read: Fuel shortage hits Andhra, CM Naidu orders urgent steps as 421 outlets shut

Oil Minister Hardeep Singh Puri said the financial burden of insulating Indian consumers from international energy shocks is now placing extraordinary pressure on public sector fuel retailers.

According to him, combined under-recoveries on petrol, diesel and LPG have touched nearly Rs 1.98 lakh crore during the current quarter, while the actual losses are estimated at close to Rs 1 lakh crore.

He noted that losses of this scale in a single quarter are substantial enough to wipe out the profits these companies usually generate in an entire financial year.

‘No immediate risk’

Without giving any indication on whether a fuel price revision may be considered, Puri admitted the mounting losses remain a growing concern for the government. "How long will the oil companies be able to take it (losses)... frankly, that's something that worries me".

At the same time, he maintained that India faces no immediate supply-side concerns despite the uncertainty surrounding global shipping routes and regional tensions. "Today, we are in a situation where we don't know how long the blockades or counter-blockades will continue. But I can tell you categorically..." he said, reiterating that there was "absolutely no cause for anxiety."

(With agency inputs)