Margins on petrol and diesel have turned positive following softening of international oil prices but a revision in retail prices may happen only after state-owned oil firms recoup losses they incurred last year, officials said.
State-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have temporarily abandoned the daily price revision since last year and have not revised petrol and diesel prices in line with the cost. And the losses they incurred when the oil prices were higher than the retail selling prices are now being recouped with rates dropping.
Officials said the three firms have been making positive margins on petrol since the fourth quarter of the 2022 calendar year but diesel, which accounts for the bulk of the fuel sales, had been in red.
But last month, margins on diesel turned positive with a small 50 paise a litre profit, they said, adding, this, however, was not enough to make up for the past losses.
International oil prices had spiked to USD 139 per barrel in March 2022 in the aftermath of the Russia-Ukraine war. They have since cooled to USD 75-76.
At peak, oil firms lost Rs 17.4 per litre on petrol and Rs 27.7 a litre on diesel. In the October-December quarter, oil firms earned Rs 10 a litre margin on petrol but lost Rs 6.5 on diesel. In the following quarter, the margins on petrol moderated to Rs 6.8 a litre while diesel earned Rs 0.5 per litre.
Officials said besides past losses, oil companies want to see if the drop in oil prices will last.
"I guess they will watch for the prices for one more quarter (April to June) before deciding to restart fuel price revision," an official said.
Holding prices when input cost was higher than retail selling prices led to the three firms posting net earnings loss. They posted a combined net loss of Rs 21,201.18 crore during April-September despite accounting for Rs 22,000 crore announced but not paid LPG subsidy.
International oil prices have been turbulent in the last couple of years. It dipped into the negative zone at the start of the pandemic in 2020 and swung wildly in 2022 -- climbing to a 14-year high of nearly USD 140 per barrel in March 2022 after Russia invaded Ukraine, before sliding on weaker demand from top importer China and worries of an economic contraction.
But for a nation that is 85 per cent dependent on imports, the spike meant adding to already firming inflation and derailing the economic recovery from the pandemic.
So, the three fuel retailers, who control roughly 90 per cent of the market, froze petrol and diesel prices for the longest duration in at least two decades. They stopped daily price revision in early November 2021 when rates across the country hit an all-time high, prompting the government to roll back a part of the excise duty hike it had effected during the pandemic to take advantage of low oil prices.
The freeze continued into 2022 but the war-led spike in international oil prices prompted a Rs 10 a litre hike in petrol and diesel prices from mid-March before another round of excise duty cut rolled back all of the Rs 13 a litre and Rs 16 per litre increase in taxes on petrol and diesel effected during the pandemic.
That followed the current price freeze that began on April 6, which still continues.
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