Weak rupee is hitting revenues of state-run oil marketing firms: Jaipal Reddy

NEW DELHI: Petroleum minister Jaipal Reddy has said that depreciation rupee is hitting revenues of state-run oil marketing firms as weakening of rupee against dollar by Re 1 impacts costs of diesel, kerosene and cooking gas by Rs 8,000 crore per annum.

“The exchange rate which was Rs 46 per US dollar at the beginning of September 2011, is now hovering around Rs 49,” an oil ministry statement said on Monday quoting Reddy.

The government is committed to protect the interests of common man and efforts are being made to minimize the impact of rising crude prices, Reddy said at the consultative committee meeting in Mumbai.

The average price of the Indian basket of crude oil, which was $69.76 per barrel in 2009-10, has shot up to$111 per barrel, he said.

“To minimize the burden of rise in international prices on consumers, the government has eliminated the customs duty on crude oil and reduced customs duty on petroleum products by 5%. Excise duty on diesel has also been reduced by Rs 2.60 per litre,” he added.

Despite duty reduction, state-run oil marketing firms are suffering revenue losses of Rs 271 crore per day. “They are expected to incur an under-recovery of over Rs 121,000 crores during the FY 2011-12,” he said.

The minister said that the under recoveries had affected companies’ financial health and diminishing cash flows have reduced resource generation for expansion and modernization.

“OMCs are forced to borrow even for their working capital requirements,” said Reddy.

“If their financial health deteriorates on account of under recoveries, their ability to discharge assigned task of supplying the entire country with petroleum products would suffer,” he added.

Good financial health of OMCs is a pre-requisite for ensuring long-term energy security in the country, Reddy said.