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Oil marketing firms to be hit next fortnight

Pradeep Puri

Profits of the three public sector oil marketing companies will take a major hit after 15 days when they start processing crude being contracted now. So far, the refineries were processing crude contracted in February and March, when the international price was ruling at around $20-22 a barrel.

The new contracts are being finalised at around $25-26 a barrel. This will squeeze the margins of the refining and the marketing companies. The standalone refineries, however, may not feel the pinch since they will be selling their products to the marketing companies at import parity prices.

This implies that Reliance's 27-million tonne Jamnagar refinery and Mangalore Refineries' 9-million tonne refinery will remain insulated from the spurt in international prices.

The four other standalone refineries in the country have either been merged with Indian Oil Corporation or with Bharat Petroleum Corporation Limited.

After ruling easy during the last quarter of 2001-02, oil prices started hardening from mid-March. The average price of the Indian basket of crude, which stood at $22.75 a barrel during the last financial year, jumped to $23.33 a barrel in March this year.

The average price during the current month will be around $25.92 a barrel.

The Indian basket represents free-on-board prices of crude in the ratio of 54:46 of Oman/Dubai (sour) and Brent (sweet) crude.

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