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The government is unlikely to reduce the retail prices of petrol and diesel any time soon as the oil marketing companies (OMCs), which had absorbed the volatility in prices witnessed since February 24, are still facing retail losses of around ₹10 per litre on diesel.
The three OMCs – IOC, HPCL and BPCL– cumulatively incurred a loss of ₹26,000 crore in Q2 FY23. It was their weakest performance in the first half of a fiscal in the last decade.
“Revision won’t happen this month at least. This talk about reducing retail prices as global crude oil prices are softening. They fell to $80-82 a barrel for one day and again rose to $85-86 levels. So, this analogy that prices came down for a day and based on that retail prices should come down is not a fair assessment of the situation. It will take the OMCs some time to recoup the losses they incurred on freezing of retail prices,” a senior government official said.
Retail price of petrol remains unchanged at ₹96.72 per litre in Delhi, while diesel is at ₹89.62 in Delhi. 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.
The under recoveries on LPG is largely not there as the backlog has been cleared. However, in petrol and diesel combined, under recoveries is there. On diesel, they are very high. The losses on petrol have come down significantly, the official added.
OMC compensation
The official said the Ministry of Petroleum & Natural Gas (MoPNG) will be approaching the Finance Ministry to compensate OMCs
“MoPNG will seek compensation for FY23. Ministry is working on the compensation amount. OMCs acted as responsible corporate and took a hit in interest of the common man and the overall economy and now there is a need to compensate them,” the official added.
OMC losses
ICICI Securities in a recent report pointed out that the blended retail loss is at ₹10.3 per litre (average for April 2022 to Nov 25, 2022).
In another report on OMC losses, the brokerage said, “Earnings for the 3 OMCs remain subdued for the second successive quarter (Q2 FY23). Overall EBITDA loss of ₹20,100 crore vs loss of ₹17,040 crore in Q1 and PAT loss of ₹26,000 crore vs loss of ₹18,480 crore implies the weakest H1 performance in the last decade for OMCs.”
Mounting losses
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