Rollback will hit OMCs: Crisil

Mumbai: As the clamour for rollback in petrol prices grows, ratings agency Crisil on Thursday warned oil retailers will lose up to Rs 1,700 crore annually for every Re 1 reduction in petrol prices.

"The OMCs (oil marketing companies) are likely to incur annual losses of Rs 16-17 billion for every Re 1 per litre rolled back," the ratings agency said in a note released here today.

There is a growing demand for a rollback in the price hike of Rs 7.5 per litre announced after the culmination of the budget session of the Parliament yesterday.

In the backdrop of strong protests by allies in the ruling UPA and the Opposition, a Congress spokesman today hinted at the possibility of a partial rollback.

Crisil, however, said that the steep price hike announced yesterday would benefit only the OMCs and would not take care of government's subsidy burden, which can only be reduced if prices of diesel, liquified petroleum gas and kerosene are hiked by 10 to 15 per cent.

"A 10-15 per cent increase in the prices of regulated fuels in inevitable," it said, adding that if the revision does not take place, the additional subsidies will have an impact of up to 0.80 percent on the fiscal deficit.

A 10-15 percent hike will limit the impact on fiscal deficit to 0.50 percent, it said.

In its budget, the government has set a target of containing fiscal deficit at 5.1 percent of the GDP in FY13, as against the 5.9 percent in the previous fiscal. Analysts say this is too ambitious a target given the slowdown in growth, depreciating rupee and elevated oil prices.

While making a hard pitch for hikes in regulated fuels, Crisil has warned that the solitary hike in the de-regulated petrol will only increase the "dieselisation" in the passenger car segment.

Meanwhile, another rating agency Fitch has said that "Partial de-regulation is compounding the problem of under-recovery by skewing the consumption pattern in favour of diesel, which is highly subsidised,".

The Fitch note said the growth in diesel consumption outpaced growth in petrol consumption last fiscal unlike earlier when petrol's growth was higher.

Courtesy the unilateral increase in petrol alone, Crisil said, "the proportion of diesel cars sold is expected to increase to 42-43 per cent in 2012-13 from around 39-40 per cent in 2011-12."

PTI