OMCs Still Losing Rs 500 Crore Daily Despite Rs 3 Fuel Price Hike: ICRA

The latest Rs 3-per-litre increase in petrol and diesel prices has provided only limited relief to state-run oil marketing companies (OMCs), as elevated global crude oil prices continue to put pressure on their margins, according to rating agency ICRA.

Prashant Vasisht, senior vice-president and co-group head (corporate ratings) at ICRA, said OMCs are still incurring losses of around Rs 500 crore every day on the sale of auto fuels and domestic LPG even after the latest fuel price hike.

“The modest hike in retail price of Rs 3/liter for petrol and diesel provides limited relief to the oil marketing companies. ICRA estimates that at crude price of $105-110/barrel and considering past 10-year average crack spreads of auto fuels, oil marketing companies incur

a loss of about Rs 500 crore daily on the sale of auto fuels and domestic LPG, even after factoring the fuel price hike,” Vasisht said.

The comments come at a time when international crude oil prices have surged sharply to currently trade at around $107 per barrel amid rising geopolitical tensions in West Asia and concerns over supply disruption through the Strait of Hormuz, one of the world’s most critical oil transit routes.

India, which imports more than 85 per cent of its crude oil requirements, remains highly vulnerable to any spike in global crude prices and a weakening rupee. The rupee has also remained under pressure against the US dollar, increasing the cost of crude imports for Indian refiners.

OMCs such as Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited on Friday raised petrol and diesel prices by around Rs 3 per litre after a prolonged period of price stability.

However, analysts believe the latest increase may not be enough if crude oil prices continue to remain above the $100 per barrel mark.

“Accordingly, the oil marketing companies would need to relook at the retail prices in case elevated crude oil prices persist,” Vasisht added.

The statement indicates that further fuel price hikes cannot be ruled out in the coming weeks if geopolitical tensions remain elevated and crude prices do not cool down.

Higher fuel prices are also expected to have a cascading impact on inflation, transportation costs and household budgets, especially at a time when food inflation concerns are already persisting in several categories.