indian trend

8/3/2019 Indian Trend

1/4

Indian Petroleum Industy: An Update

http://industrytracker.wordpress.com/2011/05/05/indian-petroleum-industy-an-update/May 5, 2011Sonal ThakurLeave a commentGo to comments

Prices of petrol and diesel in India are likely to rise by Rs 5 per litre. Given the highinflation and rising costs of commodities, profits of companies in India are expected

to be adversely affected.The latest figures released by the Petroleum Planning and

Analysis Cell (PPAC) show that demand for petroleum products rose by 4.4% (year-

on-year) to 144.35 million tonnes during the financial year 2010-11.

Currently, India has a petroleum refining capacity of 144.35 million tonnes per

annum. This is expected to rise to 240 million tonnes by September 2012.

Following are the major projects that are likely to get commissioned in the next 12-

18 months:

Bharat Oman Refineries Bina refinery project was initially scheduled forcommissioning in April 2011, no updates are available on completion till date.

However, it is sure to get commissioned in FY 2011-12. The refinery will have an

annual refining capacity of 60 lakh tonnes.

HPCL-Mittal Energy will commission its Guru Gobind Singh refinery project atBhatinda in Punjab by September 2011. This is a joint venture company between

Hindustan Petroleum and Mittal Energy Investments. On completion, the project will

add capacity of 90 lakh tonnes.

Essar Oil is expected to complete its Vadinar Oil refinery phase-I project by July2011. This will enhance its existing capacity of 105 lakh tones per annum to 180lakh tonnes per annum. The company has also announced its plans to add another

20 lakh tonnes per annum in phase-II and take the total capacity to 200 lakh

tonnes per annum by September 2012.

IOCL is expected to commission its green field Paradip refinery by mid-2012. Theproject will add a refinery capacity of 150 lakh tonnes per annum.

(Source: CMIE)

Currently, Indias total demand for the petroleum products is pegged at around 140

MTPA. This creates a spare capacity of 48 million tonnes per annum at the

refineries. Post capacity addition, the country would have an excess petroleum

refining capacity of around 90 million tonnes per annum in next 12 to 18 months.

This excess capacity is believed to boost exports of petroleum products from India.

Consumption of Petroleum

Products (million tonnes)
http://industrytracker.wordpress.com/2011/05/05/indian-petroleum-industy-an-update/http://industrytracker.wordpress.com/2011/05/05/indian-petroleum-industy-an-update/http://industrytracker.wordpress.com/author/sonalthakur/http://industrytracker.wordpress.com/2011/05/05/indian-petroleum-industy-an-update/#commentshttp://industrytracker.wordpress.com/2011/05/05/indian-petroleum-industy-an-update/#commentshttp://industrytracker.wordpress.com/2011/05/05/indian-petroleum-industy-an-update/#commentshttp://industrytracker.wordpress.com/author/sonalthakur/http://industrytracker.wordpress.com/author/sonalthakur/http://industrytracker.wordpress.com/2011/05/05/indian-petroleum-industy-an-update/


2/4

2010-

11

2009-

10

% Y-

o-Y

growth

LPG 14.4 13.1 9.6%

Motor Spirit

(Petrol)

14.4 12.8 12.1%

Naphtha 11.5 10.1 13.9%

Aviation

Turbine Fuel

5.1 4.6 9.1%

SuperiorKerosene

8.9 9.3 -3.8%

High Speed

Diesel

60.4 56.2 7.3%

Light DieselOil

0.4 0.5 -6.0%

Lubes 2.6 2.5 0.8%

Furnace Oil /

LSHS

11.4 11.6 -1.7%

Bitumen 4.7 4.9 -6.0%

Others 10.7 11.9 -11.1%

Total 144.4 137.8 4.8%

While domestic demand for petroleum products is rising at a healthy pace, sale of

essential petroleum products at government determined prices which are way

below market prices, results in under-recoveries for the public sector petroleum

companies. These essential products include diesel, kerosene (under PDS) and LPG

(for domestic use).

The three public sector oil marketing companies are Indian Oil Corporation,

Hindustan Petroleum Corporation and Bharat Petroleum Corporation.

Crude oil is the main raw material used by the petroleum industry. A surge in crude

oil prices leads to higher costs for the refineries. Given that average price of Indian

basket of crude oil has risen to $121.9 per barrel (FOB basis), the Petroleum


3/4

Ministry has released the product-wise under-recovery for the oil marketing

companies in India.

Product-wise Under-recovery of Public Sector

Oil Marketing Companies

Product Unit Under-

recovery (effective

May 01, 2011)

Diesel Rs/litre 16.17

PDSKerosene*

Rs/litre 28.28

Domestic

LPG*

Rs/cylinder 329.73

*Additionally, a subsidy of `0.82/litre on PDSKerosene & `22.58/Cylinder on Domestic LPG isprovided by the Government. Source: Petroleum

Ministry

OMCs are currently incurring daily under-recovery of Rs 495 crore on the sale of

diesel, PDS kerosene and domestic LPG. Assuming Rs 500 crore daily, the under-

recoveries for the financial year 2011-12 can be estimated at Rs1.8 lakh crore. The

revenue loss, termed as under-recovery by oil firms, will be the highest ever, even

more than what they lost in FY09 when crude touched a record high of US US $147

a barrel.

In addition, OMCs lose about Rs7.50 per litre on petrol, whose rates although

decontrolled have not moved in line with the imported costs because the companies

need to seek an approval before raising rates.

During the financial year ended March 2011, the three OMCs lost Rs 78,202 crore,

however, so far the government has provided only Rs 20,911 crore in

compensation. The oil marketing firms lost Rs 2,227 crore on selling petrol below

imported cost during April-June 2010, before its price was freed from the

government control. Loss on sale of diesel was Rs 34,384 crore, Rs 19,566 crore

was on sale of PDS kerosene and Rs 22,025 crore on sale of domestic LPG.

Retail Price of Petrol (Rs per litre)

Delhi Mumbai Chennai Kolkata

Sep

16,

2010

51.9 56.3 56 55.7


4/4

Oct

16,

2010

52.6 57 57.1 56.4

Nov

9,2010

52.9 57.3 57.4 56.8

Dec15,

2010

55.9 60.5 60.6 59.9

Jan

16,

2011

58.4 63.1 63.4 59.9

Feb

1,

2011

58.4 63.1 63.4 62.5

The public sector oil marketing companies are estimated to register a fall in profits,

given the current crude oil prices. Given the high crude oil prices and rising prices

of other commodities, production costs for the Indian companies are estimated to

rise at a rapid pace compared to the previous year. If the end product prices are do

not increase in tandem with rising raw material costs, profitability of the companies

may get adversely impacted.

indian trend

Documents