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Fuel retailers hopeful after RBI statement

Fuel retailers threaten to raise prices if the government does not take steps to compensate them for the losses on sales

With RBI announcing that it will be advocating the rise in the gasoline retail prices, fuel retailers have now threatened to hike petrol prices by about 15% if the government does not take steps to compensate them for the losses on sales and temporarily regulate the prices.

RBI governor Duvvuri Subbarao said in the Annual Monetary Policy Statement for 2012-13 that it has become important for macroeconomic stability that the administered prices of petroleum products are increased so that the true costs of production are reflected. The statement would certainly make fuel retailers optimistic of their case being addressed.
In the second half of 2011, oil companies began reflecting the market realities more closely and raised the local gasoline retail prices. However, the process stopped towards the end of November when the government opposed the hikes. In some states the decision to oppose the hiking of the retail prices of fuel was more of a political move which was evident from the fact that it came right before the elections.
Oil majors on losing end
With the government putting a stop to the hiking of prices of fuel, oil companies like Indian Oil Corporation (IOC), Bharat Petroleum and Hindustan Petroleum have witnessed massive losses. Reports indicate that the companies have in total suffered revenue losses worth Rs 22.87 billion during the period ranging December 16, 2011 to March 31, 2012. 
According to a statement by the IOC, the country’s biggest fuel retailer, the revenue losses on retail sales of gasoline in the first fortnight of this fiscal was Rs 7.45 billion.
The refiners have also urged the government to reduce factory gate tax on gasoline from Rs 14.78 a litre to an amount that is equivalent to the revenue loss on retail sales. They also demanded that the state governments cut local levies varying from 15% to 33%.
IOC is also asking for an increase in prices of the three fuels sold at subsidised rates during 2012-13. The combined revenue losses of refiners on such sales could surge to Rs 2.04 trillion from Rs 1.39 trillion a year ago.
Sambuddha Sengupta

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