BPCL seeks RBI nod to source 100% $ requirement from 1 PSB

The chairman and managing director of BPCL RK Singh today confirmed that the Reserve Bank of India has asked oil marketing companies to source 50% of their dollar requirement from one public sector bank. “The balance 50% will be sourced from a group of banks,” he added.

Speaking to CNBC-TV18, Singh said that the Petroleum Ministry has made a request to allow OMCs to procure 100% of requirement from one bank. “But the RBI has not reverted yet,” he said. The Reserve Bank of India had instructed state run OMCs to buy more of the US currency from a single public sector bank and reduce the amount they source through competitive quotes from multiple banks, hoping the move will help arrest the free-fall of the rupee. The Indian currency crossed the 57 mark last week on high dollar demand. The depreciation of the rupee has negated the positive impact of falling crude prices. Brent crude prices fell below USD 90 per barrel last week, but OMCs withheld a petrol price cut during their fortnightly review citing high volatility as the reason. “The prices are moving up and down very fast, there is high amount of volatility in the market places, so it’s better to wait and watch and let it stabilise,” said Singh. But if crude prices do stabilise, and the rupee-dollar value also finds some strength, Singh says they will not hesitate from passing on the benefits to the consumer. Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video. Q: Can you confirm whether or not the Reserve Bank of India has asked oil marketing companies to approach a single window or a single public sector bank in order to claim any of its dollar requirements. Has that been done already, is that process underway or is that just a recommendation now from the RBI? A: Yes they have asked us to buy 50% of requirement from one public sector undertaking (PSU) bank and the balance 50% from the group of banks. So that is the advice that has come from RBI because there is a perception that if we go into the market for competitive bidding it creates artificial demand and therefore the rupee tends to get weaker and dollar stronger. That is the perception in the minds of the people therefore they have said that 50% of the requirement should be bought from one bank and balance 50% from the group of banks. But I think the Petroleum Ministry has written back to the RBI requesting them to give us 100% and we are also discussing that with them. They have not come back so far, so I hope they release the entire amount rather than asking us to take 50% from the PSU bank. We are in discussion with them and nothing has been implemented as of now. Q: The thing which surprised a few people is that a petrol price cut on 15th June did not happen. Can you explain to us why oil marketing companies chose not to cut prices of petrol, because we believe that the parity price after the fall in crude is probably little bit lower than the market price today? A: We have discussed this subject many times. The prices are moving up and down very fast, there is high amount of volatility in the market place. One knows what happens if we were to increase prices. So it’s better to wait and watch and let it stabilise. Remember crude prices had gone down to USD 89 per barrel last two-three days back and now it has bounced back to more than USD 91 per barrel. So in this kind of volatility it is better to wait and watch. Rupee is also fluctuating at a very high rate, so we are trying to see the pattern for the next few days. If there is a justification we will certainly be glad to pass on the benefits of the consumers, but at the moment let’s wait and watch. Q: How much have your diesel losses come down by because of the fall in the price of crude? Also, anything that you have been hearing from Delhi about allowing you to raise prices of diesel even by little bit? A: Diesel, kerosene and LPG is controlled by the government and the Empowered Group of Ministers will have to take a call on that. Right now government maybe busy with its own activities, so I have no clue as to when EGoM is going to sit and take a decision on this. But as far as under recoveries are concerned, on diesel it use to be Rs 13.64 paise. Now it has come down to Rs 10.20 paise as of the fortnight ending on 16th June. So the recent fortnight calculation has yet to be done, but I am sure under recoveries will continue to reduce. Q: What is the situation with the current petrol price for oil marketing companies like yours because our last interaction indicated it was neutral whereas there are suggestions this morning that oil marketing companies maybe enjoying a margin of as high as Rs 5 in some cases? A: It cannot be Rs 5. The benefit that you are talking about is being neutralised by the weakening of the rupee. All I can say at this moment of time is that we are not losing, but it certainly not be a benefit to the extent of Rs 5. Q: Any indications in terms of whether or not the government may move sooner on some kind of duty relief for oil companies? A: We have no information, but as I told you whenever decision is taken in my view they will have to do combination of things. This could be duty rejig plus a little dose of price increase. So what kind of combination they finally work out is something they will have to decide, I do not have any clue.