The fuel price revision on Wednesday is likely to wipe out the Rs 1,100 crore net revenue earned by the three oil marketing companies--Indian Oil Corporation, Bharat Petroleum Corporation [Get Quote] and Hindustan Petroleum Corporation [Get Quote] -- in the last one month, say officials from these companies.

Prior to the price cut, these companies were getting a high retail margin of Rs 8 per litre on petrol and Rs 3 per litre on diesel, which more than offset the under-recoveries on LPG (Rs 32 per cylinder) and kerosene (Rs 14 per litre). 

With the price-cut of Rs 5 per litre on petrol, Rs 2 on diesel and Rs 25 per LPG cylinder along with the increase in crude oil prices, these margins are likely to be eroded.

The price of the Indian basket of crude has already crossed $40 per barrel from a low of $35 last month.

Analysts say the price revision could impact the January-March quarter's margins of these companies, especially if international crude oil prices rise further.

"This price reduction could also spur demand, and if the international crude oil prices also spike, together they could impact the bottom line of the oil marketing companies," said a Mumbai-based analyst.

However, the oil marketing companies are of the view that oil bonds would save the day for them. "The government has decided to compensate us in full towards the losses we would make on sale of fuel, and this might help us stay in the green," said a senior IOC official.

To partly compensate OMCs, the government has already approved the issue of oil bonds of Rs 60,967 crore and the upstream oil companies have also contributed Rs 32,000 crore to partially take the subsidy burden of Rs 106,000 crore notched up in the April-December period.  

The extent of under or over-recovery the OMCs make on sale of  fuel will be ascertained next week when these firms revise prices of petro products. Oil companies revise prices twice a month (on the 1st and 16th of every month) based on the average imported price for the preceding fortnight.

While the Oil & Gas Index was down 0.87 per cent on the Bombay Stock Exchange today, BPCL closed at Rs 389, up 2.76 per cent; HPCL closed at Rs 278.25, up 2.73 per cent and IOC closed at Rs 435.75, up 0.22 per cent.