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.
The BSE Sensex was down 526.59 points, or 3.64%, to 13,896.98 on weak cues from global markets. US stocks plunged on Thursday, 26 June 2008, with the Dow Jones Industrial Average sliding about 360 points to a 21-month low as oil hit a record and Goldman Sachs urged investors to sell bank and auto maker shares, escalating concern about the outlook for profits.
The sharp spurt in crude prices will put further pressure on fuel retailers as they continue to sell products below the cost price. Global crude oil prices are up over 40% in this calendar year so far.
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.
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