Weak rupee signals worries for BPCL, HPCL, IOC

Moneycontrol Bureau

Oil companies' shares have declined over 12 percent in the last one month due to continued weakening of the rupee against the dollar, making crude oil imports expensive.

Oil firms like Bharat Petroleum, Hindustan Petroleum and Indian Oil Corp import around 70 percent of their oil requirement for which payment is done in dollar denomination. The rupee has depreciated to around Rs 59 against the dollar currently.

A one rupee movement against the greenback increased under-recoveries by around Rs 9,000 crore, oil industry sources told CNBC-TV18 who also confirmed that downstream oil firms have already lost around Rs 22,000 crore due to the rupee weakening against the dollar.

Fuel retailers, who are already incurring losses on sales of  petroleum products expect their losses to widen further. In FY13, oil firms reported under-recoveries of over Rs 1.6 lakh crore which they were partly compensated by the government and upstream companies.

With this reality at play, oil companies are even more worried since analysts have predicted that the rupee is likely to remain under pressure in the near term as India runs a high current account deficit of an estimated over 5 percent for the current quarter.

This unfavourable forecast by analysts have added to the worries of oil companies who are currently reeling under losses of around Rs 80,000 crore on account of burgeoning under-recoveries on diesel.

Though crude oil cost is stable at Rs USD 105 per bbl for each barrel Q-o-Q, it will not have much impact  on the toplines of these companies immediately. It is only if crude cost continues to fall in the ensuing quarters, oil companies will be able to mitigate losses in the long term, say officials at oil companies.

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