Imports will be hit if no hike in fuel prices, says Indian Oil chief.

State-run refiner and retailer Indian Oil Corporation has said its ability to import oil will be hurt if there is no price hike in auto fuel.

“We have made a suggestion of the government on prices,” said RS Butola, chairman and managing director of IOC. “If price rise is delayed our import ability will come down.”

“It will be better to pass on the increases in small sums as and when they are needed,” he said.

He added that there has been no assurance from the government yet.

Butola added that there were only two options left to the government: to either hike prices or lower state and central taxes.

He also said that the company needs to give the government time to decide.

Industry minister Praful Patel said he has discussed revision of MoU (memorandum of understanding) system in Navratna and Maharatna companie4s as fluctuations in business targets occur as the “present MoU system has no revision system”.

Fuel retailers on Tuesday threatened to hike petrol prices by about 15 per cent if the government did not temporarily regulate prices and compensate them for losses on sales, further evidence that the liberalized market really remains under New Delhi's control.

The hike would translate into a Rs 1.59 increase at the pump, based on current petrol prices in Mumbai.

In its policy review on Tuesday, the Reserve Bank of India (RBI) also advocated raising the retail price of petrol.

India freed pricing of petrol in June 2010 but continues to subsidize prices of petrol, kerosene and cooking gas to protect the poor from the impact of any inflation pressures.

In the second half of 2011, oil companies began reflecting market realities more closely and raised local petrol prices but stopped from end-November on the request of the government—their majority shareholder—ahead of elections in some states. Petrol prices were last revised on December 1.

State refiners—Indian Oil, Bharat Petroleum and Hindustan Petroleum—have suffered revenue losses of Rs 2,287 crore because they haven't changed petrol prices from December 16 to March 31.

In the first fortnight of this fiscal year beginning April 1, the revenue loss on retail sales of gasoline was Rs 745 crore, Indian Oil, the country's biggest fuel retailer, said in a statement on Tuesday.

Indian Oil said state-run refiners cannot sustain the current scenario where they import crude oil at $121.29 per barrel and sell at $109.03 per barrel.

"Continuation of such pricing will only impede the ability of the company to import crude oil and may affect product supply-demand balance," it said, adding that the alternative was to "increase the price of petrol by Rs 8.04 per litre (excluding state levies) with immediate effect."

The refiners have urged the government to lower factory gate tax on gasoline from Rs 14.78 a litre by an amount equivalent to the revenue loss on retail sales and asked state governments to cut local levies, varying from 15 per cent to 33 per cent.

Indian Oil is also seeking an increase in prices of the three fuels sold at subsidized rates as in 2012-13 the combined revenue losses of refiners on such sales could surge to Rs 2.04 trillion from Rs 1.39 trillion a year ago, against which full compensation is yet to be received.

Source : profit.ndtv.com