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A report said losses suffered by IOC, BPCL and HPCL in April-June quarter may wipe out their entire annual profit of Rs 76,000 crore.
Oil tankers parked outside the Indian Oil Corporation refinery, in Mathura. (IMAGE: PTI)
India’s state-run fuel retailers are staring at first-quarter losses large enough to wipe out profitability for the full fiscal year, news agency PTI reported on Monday. The report cited soaring crude oil prices and a government-led freeze on pump prices as key reasons behind the squeeze in marketing margins.
The report pointed out that since the war broke out in West Asia 10 weeks ago, state-owned oil marketing companies (OMCs) have ensured uninterrupted supplies of petrol, diesel and cooking gas LPG at rates significantly below cost.
Despite a 50 per cent surge in crude oil prices, petrol and diesel continue to retail at two-year-old rates of Rs 94.77 per litre and Rs 87.67 per litre respectively. Domestic cooking gas LPG prices were raised by Rs 60 per cylinder in March but remain well below actual cost.
This stands in contrast to several global markets, many of which have either imposed fuel rationing or passed on higher prices to consumers.
Cumulative Losses Reach Nearly Rs 1 Lakh Crore
According to the report, the three state-run OMCs — Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) — are now facing record-high under-recoveries, or the gap between the actual cost and retail selling price of fuel.
The combined under-recovery on petrol, diesel and cooking gas LPG currently stands at Rs 1,000 crore to Rs 1,200 crore per day, the PTI report said.
“At current oil prices, the losses in the current quarter (April-June) will wipe out the company’s entire year’s profit of about Rs 76,000 crore,” an unnamed official told PTI. The official added that after accounting for losses in March — the first month of the crisis — cumulative losses have reached nearly Rs 1 lakh crore.
The oil companies are currently losing Rs 14 per litre on petrol, Rs 42 per litre on diesel and Rs 674 per cylinder on cooking gas LPG.
The official further told PTI that while OMCs had managed to shield the domestic market from global price shocks over the past 10 weeks, the financial strain is now becoming visible. They added that the companies may need to increase borrowings to meet working capital requirements, including crude oil purchases.
“If elevated crude prices persist for an extended period, OMCs may require higher working capital borrowings and calibrated reprioritisation of some capex timelines,” the official was quoted as saying.
“However, strategic investments in refining expansion, energy security infrastructure, ethanol blending, biofuels and transition fuels continue to remain national priorities and are expected to proceed with government support.”
Prices Still Frozen Despite Global Oil Shock
While countries ranging from Japan to the United Kingdom have raised petrol and diesel prices by as much as 30 per cent since the start of the West Asia conflict, fuel prices in India have remained unchanged for nearly two years.
This is despite the conflict disrupting India’s imports of crude oil, cooking gas LPG and natural gas, all of which are critical to the country’s fuel, power and fertiliser sectors.
Even as the three OMCs worked to maintain uninterrupted fuel supplies amid panic buying and supply disruptions, the Centre stepped in by reducing excise duties to absorb part of the burden.
The special additional excise duty on petrol was cut to Rs 3 per litre from Rs 13, while excise duty on diesel was reduced to zero from Rs 10 per litre.
The government is estimated to be losing around Rs 14,000 crore every month because of the excise duty cuts, the official told PTI.
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