OMC`s under-recoveries at Rs 1.4 trillion: CRISIL

CRISIL Research has come out with its report on Oil Marketing Companies (OMC) recoveries. As per the research firm if the government additionally releases Rs 350-400 billion to the OMCs over the next three months, the aggregate gearing of the OMCs will still be high at close to 2 times by the end of March 2012.

Timely government support critical for liquidity management

CRISIL Research expects under-recoveries on sale of regulated fuels to touch an all-time high of Rs 1.4 trillion in 2011-12 due to high crude oil prices and a weak rupee. Under-recoveries, which are the losses incurred by public sector oil marketing companies (OMC) from the sale of fuels at a discount to the cost price, are affecting the profits and liquidity of OMCs. Timely compensation from the government will be critical for the OMCs to manage their liquidity. Under-recoveries of OMCs are likely to touch an all-time high of about Rs 1.4 trillion in 2011-12 from Rs 780 billion in 2010-11, despite an increase in prices of regulated fuels on June 26, 2011. The almost twofold rise in under-recoveries is mainly due to high crude oil prices and a weak Indian rupee vis-

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