It is estimated that fuel under-recoveries in FY 15 will be around Rs 1 lakh crore
New Delhi: Under-recoveries on account of fuel could fall by over 25 per cent in 2014-15 (FY15), according to Fitch Ratings and this could boost the finances of the Narendra Modi government.It is estimated that fuel under-recoveries in FY 15 will be around Rs 1 lakh crore.
This will be led largely by the sharp drop in diesel under-recoveries, which was down to an average of Rs 4.1 per litre for the first three months of FY15 against Rs 8.5 in FY14.
The mechanism of marginally raising monthly diesel prices will bring down the under-recoveries, while the rise in crude prices (especially amid the Iraq crisis) is likely to put pressure on the under-recoveries.
Fitch said that it believes that it is unlikely that kerosene or household LPG prices will be raised sharply, for fear of further stoking inflation.
“The ministry of oil and petroleum had scrapped the scheme for direct benefit transfer to bank accounts of the LPG consumers in March 2014. The under-recoveries for the national oil refining and marketing companies are likely to fall if the scheme is reinstated,” it said.
Fitch said that a full deregulation of diesel would change the competitive dynamics among petroleum refiners.
“The domestic marketing of petroleum products, which is confined largely to the national oil companies — Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation would be accessible to private refiners like Reliance Industries and Essar Oil, which will then have a level playing field,” it said.
