Oil Companies May Reduce Petrol, Diesel Prices Soon
In a significant development, state-run oil companies in India are reportedly considering a reduction in the prices of petrol and diesel next month, following their anticipated record-breaking net profits in the third quarter.
Reports indicate that the combined net profits of the three oil marketing companies (OMCs) could surpass a staggering Rs 75,000 crore, prompting a potential relief for consumers who have seen fuel prices remain stable since April 2022.
Officials suggest that a thorough pricing review is imminent, with the OMCs possibly holding profit margins of Rs 10 per litre that could be passed on to consumers. Such a move is seen as a potential tool to mitigate inflation, becoming particularly relevant ahead of the 2024 General Elections.
"Due to higher marketing margins on the sale of fuels, the three OMCs posted significant net profits in Q1 and Q2 [of FY2023-24], and the trend is expected to continue in Q3. After the results by the end of this month, they may consider reducing petrol and diesel rates between Rs 5 and Rs 10 a litre, keeping some cushion for future spikes in international oil prices. A decision will be taken by the companies in consultations with their stakeholders," an insider revealed on condition of anonymity.
As the government is the promoter and majority stakeholder in all three OMCs, their combined net profit in the first half of 2023-24 has already seen a remarkable 4,917 per cent jump from the entire financial year of 2022-23, reaching Rs 57,091.87 crore.
Hindustan Petroleum Corporation (HPCL) is set to declare its Q3 results on 27 January, while Indian Oil Corporation (IOC) and Bharat Petroleum Corporation (BPCL) are expected to follow suit around the same time.
While the ministry controls public sector OMCs, it maintains that the three firms are free to change pump prices of fuel. With over 90 per cent market share, the OMCs wield significant influence on the pricing of private retailers in the domestic fuel retail business.
India's retail inflation has seen a marginal increase to a four-month high of 5.69 per cent in December 2023, primarily driven by higher food prices. The government aims to keep inflation below the Reserve Bank of India's upper tolerance limit of 6 per cent
Notably, OMCs froze petrol and diesel rates on 6 April 2022, amid volatility in international oil prices. The central government also reduced excise duty twice during this period to shield consumers from the impact of rising crude purchase prices.
The final decision on potential fuel price reductions is expected after the release of the third-quarter results, and it remains to be seen how it might impact both consumers and the economic landscape leading up to the upcoming elections.
