BPCL privatisation faces bigger obstacles than the Air India sale. Here's why
The privatisation of Bharat Petroleum may hit a roadblock due to high fuel prices due to a rise in global crude oil prices.
The price of global benchmark Brent crude oil has risen 13% in a month to $85 per barrel, its highest level in seven years.
A senior oil ministry official told Business Standard that state-run oil marketing companies were currently taking a hit on the sale of petrol, diesel and LPG and expected to recover losses when oil prices would soften later. The fuel retailers are losing about Rs 100 for every domestic LPG cylinder sold.
Indian Oil, Hindustan Petroleum and Bharat Petroleum adopted a daily price revision mechanism in June 2017 to pass on the impact of international oil prices quickly.
But an official said the full impact of the recent surge in crude oil prices was yet to be passed on to the consumers by oil companies.
State and central taxes account for a major part of petrol and diesel prices in India.
As on October 16, when petrol was sold at Rs 105.49 per litre in Delhi, the cost excluding taxes was Rs 44.37 per litre. Customers are paying more than twice the cost of auto fuels due to high taxation by both the Centre and states.
Even though petrol and diesel prices have been officially deregulated, the government nudges the three refiners under its control to keep prices under check.
Under the current pricing structure, the oil companies are bearing a loss with their existing marketing margin of Rs 3-4 a litre getting squeezed.
The new owners of BPCL will not like a scenario where they have to adhere to these unofficial price regulations to remain competitive.
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