
A few weeks ago, I wrote that Indian government had forced huge losses to oil firms by fixing the price of oil in the local market that was lower than the price of oil in the international market. Today, I found the news item that the loss has become unbearable both for the public oil companies and private oil firms. In my previous article, I predicted that if there was no sign of decrease in the price of oil in international market, India would suffer more and more loss in this sector.
The loss has been more terrible for the private sector companies. Indian Government has not increased the price of oil in the local market. So, the private and public oil companies have to sell petrol and diesel cheaper than their cost. Fortunately, the public sector companies are receiving subsidies from the government. So, they can afford the loss in the long run. Even, subsidy is not adequate enough to support the public sector oil companies fully and companies like Indian Oil Corporation are incurring huge financial losses on a daily basis.
India's oil minister, Murli Deora has declared that government could only give subsidy to public sector oil companies to compensate their losses and unfortunately the government can't afford to support private oil firms. Essar and Reliance are among the major players in the private sector. These oil companies are now forced to sell a bit more than the price fixed by the government. However, this is not enough and since they charge a bit more, many consumers are turning to the public sector oil companies.
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