Oil companies especially the private ones are incurring heavy losses over the sale of petrol, diesel in the country at a time when crude oil price in the international market is at record highs.

In the past several weeks, the prices of crude oil in the international market had reached up to $140 per barrel, most recently last week. Though it fell down to $110 again but it’s still way more than $80 per barrel earlier, causing losses to public sector companies as the government is not allowing petrol, diesel prices to rise for over 120 days now, says Dr. Sudhir Bisht, International crude oil expert.

Petrol and diesel are still being sold at prices based on $80 per barrel when crude oil rates in the international market are rising.

Oil companies such as Indian Oil Corporation (IOC) Limited, Bharat Petroleum Corporation (BPC) Limited and Hindustan Petroleum Corporation (HPC) Limited are incurring a loss of Rs 15 per litre, which is called under-recovery in technical terms.

With no increase in petrol, diesel prices, government companies are silently suffering losses. But the anger of private sector companies has started reflecting in the market.

Amid this, Reliance has told its dealers that they will get only 50 per cent of their normal sales supply. The company believes that under-recovery of Rs 15 is fatal for their financial health.

At present, Reliance has not tied the quota of petrol because the sale of petrol is only 15% as compared to diesel. Reliance petrol now runs under the brand name of JIO-BP. British Petroleum (BP) is a well-known company in the world.

Why would Reliance sell its diesel at a loss when it has many export orders, Dr Sudhir Bisht mentioned.

It is also being indicated in the international market that although India sells petrol, diesel under free-market pricing but government oil companies are being forced not to increase the prices.

Private sector companies are also forced to keep prices down, because if Reliance increases the price of its diesel by Rs 15, then no transporter will take oil from their pumps.

Such market intervention by the Government of India will adversely impact the success of BPCL’s disinvestment.

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