* Hopes ministerial panel will review subsidised fuel prices
* Indian oil firms seek additional 280 bln rupees cash compensation (Adds details, quotes)
NEW DELHI, Nov 2 (Reuters) - Indian state-run oil companies are expected to rack up revenue losses of 1.3 trillion rupees ($26.4 billion) in the fiscal year ending March 2012, making it difficult for them to borrow from banks, India’s oil minister S. Jaipal Reddy said on Wednesday.
Reddy said he hoped a ministerial panel to review prices of fuel sold at subsidised rates will convene before the next parliament session that is likely to begin on Nov. 22, and added that oil firms are free to fix prices of petrol.
“We should not overestimate financial capacity of our oil companies. Our oil companies will find it difficult to get loans from the Indian banks and later foreign banks,” Reddy told reporters on Wednesday.
The combined debt of state-run oil retailers — Indian Oil Corp , Bharat Petroleum and Hindustan Petroleum — rose 23 percent since March to 1.19 trillion rupees ($24.31 billion) in August.
On Tuesday, India’s state-run Hindustan Petroleum Corp Ltd (HPCL) said it was considering raising petrol prices within the next two weeks to cut down on retailing losses.
The oil refining and marketing firm posted a quarterly loss of 33.6 billion rupees ($548.4 million). Last week, its fellow state oil product seller Bharat Petroleum Corp Ltd (BPCL) posted a loss of 32.3 billion rupees.
India freed petrol prices in June 2010, but still subsidises diesel, which accounts for about 70 percent of all petroleum products used in the country.
Prices for diesel, kerosene and liquefied natural gas are regulated by the government in India, forcing oil firms to sell at losses.
The costs of these price caps have climbed as international oil prices have risen.
Reddy said he has asked for the ministerial panel to take a comprehensive view on the oil sector, but said increasing prices was a difficult decision.
“To take a decision on diesel, kerosene and LPG is not an easy affair. We will ask for review of prices but how much any democratic government can take harsh decisions,” he said.
India’s inflation barely budged in September, staying above 9 percent for the tenth straight month, driven by a jump in fuel and power prices.
India needs to raise controlled prices for diesel to cut oil firms’ revenue losses on retail sales, adding such a move could happen when inflation starts moderating, the Prime Minister’s Economic Adviser C.Rangarajan had said last month.
State-run oil companies have asked the finance ministry for an additional 280 billion rupees cash compensation to partly compensate retailers for revenue losses on fuel sold at subsidised rates in April to September, Oil Secretary G.C. Chaturvedi separately told reporters.
The finance ministry has agreed to pay cash compensation of 150 billion rupees to oil companies for the April-June quarter losses, although the amount is yet to be released. ($1 = 49.275 Indian rupees) (Reporting by Nidhi Verma and Manoj Kumar; Writing by Swati Pandey; Editing by Jo Winterbottom, Aradhana Aravindan)