The government is expected to take a call on resuming the fuel price revision mechanism next month after reviewing the oil marketing companies’ (OMC) Q2 losses and under-recoveries. As in the case of increase in prices, a downward revision, too, will be staggered.

The international oil prices on Tuesday slipped below $85 per barrel (Brent), the lowest since January, as a recession in the West and declining industrial production weighed on the markets. In India, declining oil prices have lent credence to the demand for a cut in retail fuel prices.

The retail selling prices of petrol and diesel remained unchanged at ₹96.72 and ₹89.62 a litre in Delhi, respectively. The price of domestic LPG cylinder was ₹1,053. The costs have remained high despite Russia offering discounts, as India consumes around 5 million barrels of oil per day.

The highest that Russia’s share of Indian crude oil imports went was to 18 per cent in July. The remaining came from Iraq, Saudi Arabia, the UAE and the US. The Indian basket of crude oil represents a derived basket comprising of Sour grade (Oman & Dubai average) and Sweet grade (Brent Dated) of crude oil processed in Indian refineries.

‘Wait and watch’

On the downward price revision, sources in the Petroleum Ministry said the market is presently volatile and it would be “prudent to wait and watch” the situation for 20-30 days. Besides, the process of reviewing the under-recoveries has to be completed before the price revision is finalised.

“If a revision is due, it will only happen next month, post the review. Also, currently the market is volatile as crude has come down, but LNG prices are still at elevated levels,” said a senior executive with an OMC.

Declining prices

The companies have incurred a loss of ₹23,799 crore during Q1 FY23. In Q2 as well, the OMCs continue to incur losses on sale of petrol, diesel and LPG. In September, prices of the Indian basket of crude oil averaged at $92 a barrel. In August, it varied between $91.45 and $102.88, with the average price at $97.40 per barrel — 7.67 per cent lower than July’s average price of $105.49. The average price is June was $116.01 per barrel.

Fitch Ratings in a report on Monday said, “We believe near-term prices will remain a function of the government’s efforts to balance OMCs’ financial health with inflationary and fiscal pressures. However, the marketing segment should turn profitable from FY24 as crude oil prices fall to Fitch’s assumption of $80 per barrel.”