Indian oil marketing companies are experiencing significant profits due to falling crude oil prices, but consumers have yet to see a substantial reduction in petrol and diesel prices. Despite the financial success of companies like IOC, BPCL, and HPCL, fuel prices remain high, impacting household expenses and inflation.
Indian oil marketing companies (OMCs) are enjoying a windfall, with profits surging as crude oil prices fall.
However, citizens continue to wait for a substantial cut in petrol and diesel prices at a time when even food prices and other essentials singe households' pockets.
State-run oil giants such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) are raking in profits of Rs 15 per litre on petrol and Rs 12 per litre on diesel, a significant increase driven by declining crude prices, according to a recent report by ICRA.
"ICRA estimates that the OMCs' net realisation was higher by Rs.15/litre for petrol and Rs.12/litre for diesel vis-a-vis international product prices in September 2024 (till September 17). The retail selling price (RSPs) of these fuels have been unchanged since March 2024 (Rs. 2/litre was reduced on petrol and diesel on March 15,2024)," said Girishkumar Kadam, Senior Vice President and Group Head - Corporate Ratings, ICRA.
ICRA said recent reductions in crude prices have led to improved marketing margins on retail sales of auto fuels for Indian oil marketing companies.
. Fuel prices in India have remained elevated for a couple of years now, with petrol still over Rs 100 per litre in many states, and diesel hovering above Rs 90 per litre.
These prices have a direct impact on inflation, affecting industries ranging from transportation to aviation, and even daily essentials like cooking.
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The Ministry of Petroleum and Natural Gas recently confirmed a combined profit of Rs 86,000 crore for the state-owned OMCs—25 times higher than the preceding year.
HPCL reported a record net profit of Rs 16,014 crore, a stark contrast to its Rs 6,980 crore loss in FY 2022-23. BPCL’s profit after tax stood at Rs 26,673 crore, nearly 13 times higher than the previous year, while IOC posted its best-ever refinery throughput, sales volume, and net profit.
Despite these stellar financials, Indian consumers have not yet seen any significant reduction in fuel prices, even though international crude prices have fallen to near three-year lows.
Experts suggest that OMCs now have room to cut prices, potentially offering some relief to consumers ahead of upcoming state elections in Maharashtra and Haryana.
The price of crude oil has a direct impact on the profitability of fuel retailers, particularly the OMCs that control about 90% of India’s fuel retail market.
As global crude prices have dropped, these companies have been able to widen their marketing margins.
ICRA's report indicates that the marketing margins for OMCs have improved considerably in recent weeks, thanks to this dip in crude prices.
Earlier this month, Pankaj Jain, Secretary at the Ministry of Petroleum and Natural Gas, said the oil marketing companies that fuel price reductions could be considered if crude oil prices continue to stay low for an extended period.
However, the general public remains skeptical, as previous declines in global oil prices did not lead to meaningful cuts in fuel prices in India.
You Might Also Like: Low oil prices bright spot for Indian economy? Why is Finance Ministry feeling positive about recent reductions In the full fiscal year of 2023-24, Hindustan Petroleum Corporation Limited (HPCL) achieved a record net profit of ₹16,014 crore, a significant turnaround from a loss of ₹6,980 crore the previous year.
Indian Oil Corporation Limited (IOCL) also marked a remarkable year, reporting its highest-ever refinery throughput, sales volume, and net profit.
Meanwhile, Bharat Petroleum Corporation Limited (BPCL) saw its profit after tax soar to ₹26,673 crore for FY 2023-24, nearly 13 times higher than the prior fiscal year.
Additionally, BPCL's ambitious capital expenditure plan of ₹1.7 lakh crore over five years under 'Project Aspire' highlights its dedication to generating long-term value for its shareholders.
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