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Oil marketing cos looking forward to price reduction

Our Bureau

New Delhi , Sept. 17

WITH crude oil prices dropping to a four-month low, hovering in the range of $27 per barrel, public sector oil marketing companies will have to undertake a reduction in prices of petrol and diesel if this southward price trend continues till October 1, when retail product prices are to come up for review on a fortnightly basis.

For the first time since deregulation of the oil sector on April 1, 2002 the oil companies are eagerly looking forward to a possible price reduction.

The reason is the recent Cabinet decision to provide for sharing of the burden of LPG and kerosene subsidy by the entire sector.

"We don't want the accounts of kerosene, LPG to be mixed with that of petrol and diesel. So far, the subsidy burden has been borne entirely by the marketing companies - IOC, BPCL and HPCL. Hence, we required to make as much money as we could in petrol and diesel to offset the losses in the sale of LPG and kerosene," a senior IOC official said.

The Government's decision to split the subsidy bill between the pubic sector companies in the oil sector augurs well for the marketing companies, which are required to compete with private players that do not have to face the brunt of subsidy, as they do not sell LPG and kerosene under the public distribution scheme.

The players, though in the nascent stage of setting up petrol and diesel retail outlets, are redefining the turf where the two commodities are to be sold at market prices and not overpriced to subsidise LPG and kerosene.

"Already, Essar is selling diesel 30 paise cheaper. With the halt in the privatisation process, private players are going to pump in money into setting up the retail business," a senior industry official said.

Along with a drop in crude prices, the international price of motor spirit or petrol has dropped while that of diesel has remained firm, largely driven by supply-demand constraints.

This gives the oil companies a profit of around Re 1 per litre in the case of petrol.

Given the system of fortnightly changes in prices, consumers can look forward to a drop in petrol and diesel prices, provided this trend continues up to October 1.

Article E-Mail :: Comment :: Syndication

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