Indian oil marketing companies are now making a profit of Rs 11.1 per liter of diesel and Rs 8.7 per liter of petrol, but consumers expecting a cut in retail prices amid persistent high inflation are unlikely to get any respite soon, say analysts. Not there. Image for representational purpose only.

With global crude oil prices falling below $75 per barrel last week, Indian oil marketing companies (OMCs) are now making a profit of Rs 11.1 per liter of diesel and Rs 8.7 per liter of petrol, but consumers continue to suffer retail price cuts. are expecting. No respite from high inflation is likely anytime soon.

Analysts believe OMCs would need two to three-fourths of such profits to recover losses by 2022 as they froze retail prices for the two fuels from May 2022, when the government imposed high global tariffs. The excise duty on both the fuels was cut amid rising oil prices. Russia-Ukraine War.

Three OMCs – Indian Oil (IOCL), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) – have incurred losses of Rs 18,622 crore between April and December 2022, the petroleum ministry informed Parliament last week, noting that Petrol and diesel prices have not been increased despite record high international prices. Officially, pricing of petroleum products has been deregulated and OMCs are allowed to revise prices on a daily basis.

Brent crude oil prices are expected to average around $85 a barrel between October 2022 and February 2023, with an average of $105 a barrel in the first half of 2022-23, Moody’s Investors Service said in a rating review of three OMCs late last month. I said The agency had also noted that this downward trend as well as increased purchases of subsidized Russian oil had increased the profitability of these firms.

With the impact of the transition due to the crisis in the US and European banks and fears of a reduction in demand, oil prices have fallen below $75 per barrel, reducing the gross marketing margin for Indian OMCs to Rs 11.1 per liter on diesel and Rs. 8.7 per liter has become Rs. JM Financial said in a research note on oil and gas sector.

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If crude oil prices remain below $75-80 a barrel and “the government allows OMCs to make up for past losses”, by not reducing retail prices, “it will cause them to incur huge net losses (₹50,000 crore) earlier”. ) should help to partially compensate.” nine months to 2022-23″, JM financial analyst Dayanand Mittal said. “In the absence of government compensation, OMCs will take two-three quarters to recover their losses at the current run rate,” he added.

This January, the government approved Rs 22,000 crore as compensation to OMCs for losses due to domestic LPG sales. In the budget for 2023-24, the Center has allocated Rs 30,000 crore as capital support for the oil marketing sector.

Moody’s had said, “While the timing of disbursement and the capital support mechanism are unknown at this time, this development is loan positive and will further support OMCs’ cash flows,” adding that it expected the government to “remain supportive and offset losses.” ” Oil Marketing Companies for their past losses”.

If oil marketing firms actually get some compensation from the government before the next three quarters, there may be some room for OMCs to reduce prices if global prices remain at or below the $75-80 level.