Oil marketing scrips run out of fuel as crude hits record high

Shares of three state run oil marketing companies fell between 4.02% to 6.09% at 14:22 IST on BSE after crude oil prices today hit a record high of $141.71 a barrel.

Bharat Petroleum Corporation (down 6.09% to Rs 253), Hindustan Petroleum Corporation (down 4.47% to Rs 188.20), and Indian Oil Corporation (down 4.02% to Rs 340), plunged.

On 4 June 2008, the government increased the price of petrol by Rs 5 per litre, diesel by Rs 3 per litre and LPG prices by Rs 50 per cylinder in an attemp to curb losses at its state-owned refiners and fuel retailers.

The customs duty on crude oil was reduced from 5% to nil that on petrol and diesel from 7.5% to 2.5% and on other petroleum products reduced from 10% to 5%.

Despite the price increase and duty cuts, the marketing operations of the oil companies such as Indian Oil Corpration (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) will continue to incur hefty losses.

To offset such a massive amount of under-recovery, the government would issue oil bonds oil marketing firms. The budget for 2008-09 had put the total under-recoveries on account of subsidy on petroleum products at Rs 2,45,000 crore.