Govt wants petrol & diesel prices slashed; OMCs cite Covid losses

State oil-marketing companies (OMCs) have made up for losses and can be expected to lower petrol and diesel pump prices, said a top official from the Ministry of Petroleum and Natural Gas.“Not only have OMCs had a good fourth quarter (Q4) in 2022-23 (FY23), they will have another good first quarter (Q1) in 2023-24 (FY24). If this happens, you are well within the bounds of what is legitimate to ask them to reduce prices. I do expect they will pass on some of the benefits,” the official informed the media on the sidelines of an industry event in New Delhi on Wednesday. Data for Q1FY24 will be released in July.However, this view is expected to be hotly contested by OMCs. Two top executives of OMCs present at the press briefing on Wednesday said the government is taking a dim view of the matter. They argued their companies are yet to make up for losses suffered during the pandemic and the early days of Russia’s invasion of Ukraine on February 24, 2022.Retail fuel prices in India have remained unchanged for a little over a year. On May 22 last year, petrol and diesel prices were set at Rs 96.72 and Rs 89.62 per litre.While Indian consumers were protected against surges in oil prices that took place in the first half of 2022, they have since not seen the benefits of subsequent fall in oil prices. Brent crude price has dropped from a high of $112.24 per barrel on June 10, 2022, to $74.95 per barrel at the time of filing this report.The three OMCs have booked major profits in the last quarter, the official pointed out. Indian Oil Corporation (IndianOil) reported a jump of 52 per cent in its consolidated net profit to Rs 10,841.23 crore on-year.Bharat Petroleum Corporation posted a 168 per cent jump at Rs 6,780 crore. Hindustan Petroleum Corporation grew 79 per cent to Rs 3,608 crore. Volatility in international crude and product prices benefited OMCs’ marketing earnings in Q4FY23.After a long period of decline, blended marketing margins increased to a 10-month high of about Rs 2.5 per litre in the third quarter (October-December) of FY23. In the subsequent fourth quarter (January-March), companies are estimated to have made a loss of Rs 1.2 per litre on the sale of diesel. But a profit of Rs 6.8 per litre on petrol again turned the blended margin on the two fuels positive.OMCs have also seen record-high gross refining margins (GRMs) in FY23. GRM is the amount refiners earn from turning every barrel of crude oil into refined fuel products.Case in point: IndianOil’s average GRM for FY23 rose to $19.52 per barrel, compared with $11.25 per barrel in the previous year, revealed company financials.Fuelling tusslePetrol and diesel prices have remained unchanged since May 2022Govt says OMCs have seen marketing margins zoom in FY23Higher gross refining margins have pushed up earningsOMCs, however, say profit forecast not yet solidifiedOMCs had accumulated loss of Rs 18,622 cr in first 9 months of FY23OMCs unhappyExecutives from OMCs said they have pointed out to the government that while GRMs have increased over the past several months, they have started moderating recently.“The impact of the windfall tax remains. It is difficult to say at this point in time that the worst is over,” said an OMC executive.The Centre had imposed special additional excise duty or windfall tax on certain refinery products, effective July 1, 2022, reducing the profitability of refiners somewhat.As of May 16, the windfall tax on petroleum crude has been nil, down from Rs 4,100 per tonne. The tax on diesel, petrol, and aviation turbine fuel had also continued at nil. However, the rate of tax will be raised once global prices climb.OMCs reported cumulative losses of Rs 18,622 crore in the first nine months of FY23, against a profit before tax of Rs 28,360 crore in the same period of 2021-22, the government had told Parliament earlier this year. This was primarily due to underrecoveries or the difference between the retail selling price and the international rate, for petrol, diesel, and liquefied petroleum gas.

Govt wants petrol & diesel prices slashed; OMCs cite Covid losses

OMCs have also seen record-high gross refining margins (GRMs) in FY23

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Govt wants petrol & diesel prices slashed; OMCs cite Covid losses

OMCs have also seen record-high gross refining margins (GRMs) in FY23

Listen to This Article

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