State-run oil companies are expected to lose over $40.52 billion on fuel sales, with crude oil prices almost regaining their all-time high of three years ago, the country's Ministry of Petroleum and Natural Gas warned in an interim update on the situation.
"The oil marketing companies (Hindustan Petroleum, Indian Oil and Bharat Petroleum) are currently incurring daily under-recovery of Rs. 490 crore ($110.3 million) on the sale of diesel, PDS (rationed) kerosene and domestic LPG," it said.
In 2008-09, the government had issued oil bonds worth $16 billion to the three firms  — Hindustan Petroleum, Indian Oil and Bharat Petroleum — to make up for more than two- thirds of the $23.25 billion revenue loss. Upstream oil firms like ONGC provided another $7.2 billion.
In the 2010-11 fiscal, the three Indian firms lost $17.6 billion. However, the government has provided only $4.7 billion in compensation so far. The oil marketing firms lost $501.3 million on selling gasoline below imported cost during April and June before its price was freed from the government control. They lost $7.74 billion on sale of diesel, $4.4 billion on PDS kerosene and nearly $5 billion on sale of domestic LPG.
In a separate development, India's Oil Ministry said that the country's crude oil output rose by 8.5 percent to about 3.55 million bpd in March, its fourth straight monthly rise.
The increase in output by most of the non-state companies helped the Asia's second-biggest energy consumer pump 3.3 million metric tons of oil last month, a 12 percent increase from a year earlier, it added.
Production by non-state explorers climbed 83 percent to 917,865 tons. Output from the north Indian state of Rajasthan, where Cairn India operates the country's biggest onshore oil deposit, surged almost seven-fold to 541,300 tons, according to the report.
Similarly, Indian Oil Corp raised the capacity of its biggest Panipat refinery in north India by a quarter and private refiner Essar Oil increased the capacity of its Vadinar refinery, in western India, to process 280,000 bpd crude. Output from Reliance's 660,000 bpd plant at Jamnagar in west Indian state of Gujarat rose 0.4 percent to about 688,100 bpd.
State-run refiners, meanwhile, recorded an 11.9 percent production increase in March as global refining margins slightly recovered and Indian fuel demand rose 4.9 percent. However, the output by state-owned Oil & Natural Gas Corp., the nation's largest energy explorer, fell 3.5 percent to 2.1 million tons from a year earlier.
The country's crude oil output during the month rose 12.1 percent to 783,800 bpd, still a fraction of the overall needs of the world's fourth-biggest crude importer. India's oil output grew 11.9 percent to about 754,200 bpd in the 2010-11 fiscal.
Natural gas output in India fell for the fourth straight month, declining 11 percent to 4.3 billion cubic meters in March from a year ago as output from the Reliance-operated D6 block in the east coast declined after touching about 60 million cubic meters per day. However, domestic gas output rose an annual 10 percent to 52.22 billion cubic meters in the 2010-11 fiscal.
Though India, Asia's third-largest oil consumer, is seriously trying to become as much self-reliant as possible in terms of energy needs, it still relies on imports for more than two thirds of its oil needs.
Energy cooperation between India and Saudi Arabia has witnessed a massive increase since King Abdullah's Delhi visit in 2006 and Indian Prime Minister Manmohan Singh's trip to the Kingdom in 2010.