Indian Oil PSU's continue to bleed as politicians defer their decision on Price Hike

Oil Public Sector Units of India continue to bleed and be in a precarious situation as government defers its decision to raise prices of petrol, diesel and domestic LPG atleast until next week. The UPA government is fearful of the negative political impact of a raise in Oil and other prices considering the inflation of india continues to rise inspite of subsidized oil.

If the stalemate continues, BPCL and HPCl would run out of cash by end of june and IOC may be able to sustain until September. These companies are today loosing approximately Rs 16 on a litre of petrol, Rs 23 on a litre of diesel and Rs 300 per cylinder of domestic LPG. If the companies run out of cash to import crude, fuel supplies would drastically fall creating a much larger panic in the country.

This week, the inflation rate hit a 45 month high of 8.1 percent creating unexpected challenges for the finance ministry. It has been understood that finance ministry is not willing to part with any of its revenue and at the same time unwilling to support a price increase since it would add to further inflation.

Indications so far from the Oil Ministry are that the cabinet may meet on saturday to take a view as the UPA alliance is unable to come to a decision on this topic. Political and Industry insiders are clear that no decision can be expected this week.

Our correspondents are reporting that small towns are already bearing a brunt of this stalemate, retailers are only selling the premium version of the fuel and charging higher prices and a continuation of this can create a fear and panic that the indian economy cannot afford at this time.