The oil marketing companies (OMCs) are believed to have retracted a decision to reduce the retail prices of petrol and diesel by 40 paise from Tuesday.

Late on Monday night, state-run Indian Oil Corporation (IOC) issued a notification effecting a cut in retail prices of the two auto fuels, which was subsequently retracted on Tuesday morning, according to news agency reports. .

Sources said that fuel price revision mechanism may indeed be restarted in the second half of this month. The fuel price revision may factor in the upcoming Assembly elections, especially in Gujarat.

The retail price of petrol remains unchanged at ₹96.72 per litre in Delhi, while diesel prices are at ₹89.62 per litre in Delhi. The last price revision happened in May with the government slashing excise duties on petrol by ₹8 per litre and diesel by ₹6 a litre to tame rising inflation.

“Technically, prices need to be raised as OMCs are facing huge losses on diesel at around ₹11-13 per litre. Inflation too is high. However, with Assembly election taking place in Himachal Pradesh this month and dates to be soon announced for Gujarat, nothing can be said. Let’s wait till the next fortnight for clarity,” said one of the sources.

Volatile prices

A senior executive with an OMC said presently, crude oil prices are volatile and are in the range of $92-95 per barrel. Factoring in diesel shortage globally, which is a refining issue, crude oil prices can rise further. However, Chinese demand will be the key. Also, global recessionary pressures are there, besides the geopolitical tensions and midterm elections in the US.

“Crude oil prices are expected to rule in the range of ₹95-100 per barrel by December. We will have to wait and watch the scenario. I’m not sure about the price cut, but it is a fact that we are bleeding on diesel,” he added.

‘Significant losses’

Even the Ministry of Petroleum and Natural Gas has said that OMCs are incurring “significant losses” on sale of diesel. OMCs incurred a cumulative loss (before tax) for the first quarter of FY23 amounting to ₹23,799 crore, as against a profit before tax of ₹14,642 crore in the fourth quarter of FY22. This loss is on account of under-recoveries in petrol, diesel and LPG.

Moody’s Investor Services estimates that state-owned refining and marketing companies have lost around $6.5-7 billion in revenue on the sale of petrol and diesel from November 2021–August 2022.