Oil prices are rising globally, and have already spiked to over US$65 a barrel. However, the Indian Government has refused to increase petroleum prices. If Indian Oil Corporation Ltd (IOC) is not allowed to raise petroleum product prices, the company could suffer losses to the tune of over Rs 12,000 crore for the year.
The price of the Indian basket of crude has been hovering at $57-58 in the last few days. While crude prices have doubled over the past two years, motor spirit prices have risen by a mere 30% and diesel by 20%. Currently, oil companies incur a loss per litre of Rs 3.5 on petrol, Rs 4.5 on diesel, Rs 11 on kerosene and Rs 100 per cylinder on LPG. For the entire year, IOC could end up losing over Rs 12,000 crore if it was not allowed to raise petroleum product prices in line with the soaring international prices of crude oil.
The Governments' refusal has led to mounting losses and could put on hold IOC's large capital investment plans. While the smaller projects will continue, large projects will have to take a back seat. As a result, IOC's Rs 15,000 crore Paradip refinery and petrochemicals project could get further delayed. This 15 million tonns greenfield refinery at Paradip in Orissa has already seen a 4 year delay due to a glut in the industry.
It is up to the Government to take a decision whether the Government raises product prices, cuts duties or issues bonds to IOC.
12-Aug-05 
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