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Jul 02, 2013 03:53 PM IST | Source: CNBC-TV18

Diesel hike to cut under-recovery by Rs 300cr/mth: IOC

PK Goyal, Director Finance, IOC believes if the the under-recovery trend for diesel continues then for FY14 it will be sees at Rs 59,000 crore.

India Oil Corporation on Monday announced a hike in diesel prices by 50 paise per litre, excluding VAT. PK Goyal, Director Finance, IOC told CNBC-TV18 that this increase in the diesel prices will reduce the under-recovery by Rs 300 crore per month for the oil companies.

He also informed that prior to the hike the under-recovery for diesel was Rs 8.60 per litre and now it is Rs 8.10 per litre. Goyal believes if the same trend continues the under-recovery on diesel for FY14 will be seen at Rs 59,000 crore.

Also read: Investors hold Jet Airways; bet on RIL, BPCL: Nirmal Bang

Below is the verbatim transcript of his interview to CNBC-TV18

Q: How much the under-recovery has gone down by in total for 2013 and do you expect the government to continue these diesel price hikes in this manner itself? The quantum would still be 50 paise per litre?

A: Since 17th January when the government has taken a decision to increase the prices in the range of 40-50 bps we have increased the diesel prices by Rs 3.25 since then. The 50 paise increase in the diesel prices reduces the under-recovery by Rs 300 crore per month for the industry.

Automatically suppose we have increased the prices on 1st July it will reduce the imbalance period of 9 months, it will reduce the under-recovery by roughly Rs 4,000 crore for the industry.

Q: At this point where do under-recovery for diesel stand at?

A: It is Rs 8.10. Earlier it was Rs 8.60. We have increased the price now by 50 paise. Now it is Rs 8.10 for this fortnight.

Q: Assuming we keep working at this kind of currency level, roughly around 59 zone, will this Rs 0.50 gain help a company like Indian Oil Corporation (IOC) or do you think you will keep holding this wide a gap in terms of under-recoveries despite increasing diesel prices on a regular basis?

A: Diesel, Liquefied Petroleum Gas (LPG) and superior kerosene oil (SKO) prices are controlled by Government of India. We are taking action accordingly what the government decides on this.

As on today we have an under-recovery of Rs 8.10 and if the same trend continues the under-recovery on diesel will be roughly Rs 59,000 crore for the year.

Q: At this point where do total subsidies stand at for this year? What kind of subsidy figure are we already ticking at?

A: For the first quarter total under-recovery for the industry was Rs 25,000 crore. If the same trend continues total under-recovery for the industry will be in the range of roughly Rs 120,000 crore.

The impact of Rs 1 depreciation is roughly increasing the under-recovery for the industry by roughly Rs 8,000 crore. Roughly Rs 5 has been depreciated during the current year. So, under recovery has increased in tandem with that.

Q: Will you ask the government to have any kind of talks with the government to possibly revise either the quantum or the period of the diesel price hikes because of the way the rupee has depreciated and the close to Rs 8.5 under-recovery that you are still sitting at?

A: No, we are taking up the matter at the different forums. Let us see what decision will be taken by government of India in this regard. Currently, the talks are underway.

Q: Can you tell us a little bit about petrol as well? There have been three hikes this month. Are Oil Marketing Companies (OMC) making profits on petrol? Where does it stand currently?

A: There is no under-recovery on petrol as on today. For the current year there is no under-recovery on petrol. So, we are increasing the prices in tandem with the international price and the rupee-dollar parity.

Q: There has been talk of a fresh panel being constituted to look into this diesel decontrol issue perhaps chaired by faces like Kirit Parikh etc. to open up the diesel deregulation issue, especially after the gas price hike. Has the opinion of oil companies like yours also been sought to this regard?

A: No, till date there is no meeting of this committee. Whenever the committee will be meeting we will be definitely giving our views to the company for consideration.

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