Hindustan Times (Noida)
Oil marketers oppose cut in retail fuel rates for now
NEW DELHI: State-run oil companies are reluctant to slash auto fuel rates despite making a revenue gain of around ₹3 a litre on petrol, citing a ₹10 a litre loss on diesel and accumulated losses of over ₹25,000 crore losses in the last two quarters for selling fuel below market rates, people aware of the development said.
A cut at this point also does not make sense, these people added, since the sales volume of petrol is far lower than that of diesel, which means the gains are not enough to offset the losses. Diesel constitutes about 40% of total refined fuel sales volume, while the share of petrol is less than 20%.
Two people aware of the matter who spoke to HT said fuel pricing matters are being reviewed frequently, and while fuel rates that peaked in June 2022 have now eased considerably,
the fall is not enough for price cut. “However, a final call will depend on the government after the month-end review,” one of these people said.
Although fuel retail business is deregulated, the government tacitly controls prices of politically sensitive petrol and diesel through three state-run OMCS. Indian Oil Corp (IOC), Bharat
Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) enjoy a virtual monopoly in domestic fuel retail with over 90% market share.
According to official data, India’s average crude oil import price on Monday plunged below $80 a barrel to $78.11, the lowest since January 4, 2022 (when it was $77.89 a barrel). However,it bounced back to $81.67 on Tuesday.
While average product prices in November (petrol at $93.41 a barrel and diesel at $123.75) fell sharply from their respective June average ($148.82 per barrel and $170.92), they are still marginally higher than the September level.
Benchmark Brent crude on Wednesday session jumped about 2% to $84.85 a barrel on falling inventories in the US and the imminent threat of an output cut by produces’ cartel – the Organization of the Petroleum Exporting Countries and its allies (OPEC+). The cartel’s 34th meeting to chalk out its production strategy is scheduled on December 4.
“Crude oil prices are still volatile, unpredictable and a matter of concern for a country, which is hugely import dependent. Hence, any decision on changing retail prices of petrol and diesel [domestically] will be taken vary cautiously,” a second person said, asking not to be named.
According to the latest data, India’s crude oil import dependence has jumped to almost 87% from 85% earlier. The fuel consumption is surging because India is one of the fastest growing economies, and its domestic oil output is on a decline. On an annualised basis, the consumption of petroleum products in April-oct 2022 jumped 11.8% at 126.118 million metric tonnes.
Commenting on fuel price scenario and prospects for Indian retailers, ICICI Securities’ equity research report by analysts Probal Sen and Hardik Solanki said that “recent weeks provide a glimmer of hope”. “We are in no way suggesting that prospects have definitively brightened up for the OMCS, but we do submit that we are hopeful. H2 FY23E losses will likely be much lower than H1 if the current prices and product spreads sustain,” they said in the report.