MUMBAI -- The heads of stateowned oil marketing companies (OMCs) find themselves in fix when it comes to answering the minority shareholders and the federal auditor about $1 billion projected losses on sale of petrol below cost price. The firms will have to book losses as the government will not compensate them with petrol being a de-regulated product. The independent directors in some of the firms have taken note of the situation and are likely to raise the issue in the forthcoming board meetings of these OMCs next week to announce their third quarter results.
Amember of the board of a leading oil firm said, "In the first quarter alone the OMCs have booked losses of over Rs 2,200 crore on the sale of petrol. We are still losing over Rs 3 a litre on petrol. The government and upstream oil firms will not compensate us because petrol is a deregulated product nor we are allowed to revise prices because of political compulsions."
Echoing similar feelings, adirector of a Mumbai-based OMC said, "It may lead to serious corporate governance issue as it is against the interests of minority shareholders and Sebi may come into play. We are internally discussing the issue and have appraised the government." Shares of Hindustan Petroleum and Indian Oil Corporation were down 1% each at Rs 283 and Rs 272, respectively, while shares of Bharat Petroleum dipped marginally to Rs 570 on Tuesday. Stocks of all the OMCs have tanked by almost a-third in the last six months on mounting under-recoveries for selling petroleum products below the cost price.
Though admitting that it's a serious issue, a director finance of another OMC declined to comment saying things "are beyond our control . You should ask the government". An oil analyst said, "Petrol was better a regulated product. At least, the OMCs were getting compensated for selling it below the cost price. I don't see a viable solution in the immediate future. Either petrol has to be regulated product or OMCs have to revise prices."