Public sector oil marketing companies (OMCs) have reported cumulative losses of ₹27,276 crore during the first six months of FY23 against a profit before tax (PBT) of ₹28,360 crore in H1 FY22, Oil Minister HS Puri informed the Lok Sabha on Thursday.

“Prices of petrol and diesel have not been increased by PSU OMCs since April 6, 2022, despite record high international prices. As a result, against the combined PBT of ₹28,360 crore in H1 FY22, the three OMCs-IOCL, BPCL and HPCL-have booked a combined loss of ₹27,276 crore in H1 FY23,” Puri said in a response to a starred query in the Lok Sabha.

OMC losses are due to under-recoveries in petrol, diesel and LPG on account of record high crude oil prices largely due to geopolitical tensions and freezing of retail prices of auto fuels.

Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) incurred a cumulative loss (before tax) of ₹23,799 crore in Q1 FY23 against a PBT of ₹14,642 crore in Q4 FY22.

Shielding common man

While the average price of Indian basket of crude oil increased by 102 per cent (from $43.34 to $87.55 a barrel) between November 2020 and November 2022, the retail prices of petrol and diesel increased in India by only 18.95 per cent and 26.5 per cent during this period, respectively, Puri told the Lower House.

“To insulate Indian consumers from the impact of high international crude oil prices, the Centre reduced the Central Excise duty twice on November 21, 2021 and May 22, 2022, effecting a cumulative reduction of ₹13 and ₹16 per litre for petrol and diesel, respectively, which was fully passed on to consumers,” he added.

On LPG, the Minister pointed out that LPG prices in India are based on Saudi Contract Price (CP), the benchmark for international prices of LPG. Saudi CP rose from $236 per tonne in April 2020 to $952 in April 2022 and continues to prevail at elevated levels currently. However, the Government continues to modulate the effective price to consumers for domestic LPG.

Better times ahead

Last week, ICICI Securities said OMCs witnessed a marketing loss of ₹1.2 a litre on petrol and ₹13.4 per litre on diesel in Q2 FY23. It estimates an average profit of ₹8 per litre on petrol and an average loss of ₹10.5 a litre on diesel in Q3 FY23-till date (December 6).

With the decline in crude prices, the brokerage expects the profit on petrol to increase to ₹10 a litre as on December 6 and losses on diesel to narrow to ₹4.4 a litre.

The brokerage, in a note on Thursday, said: “Our estimates suggest that with weaker international prices, retail margins will comfortably exceed break even levels for H2 FY23 and will be stronger at ₹2-3 per litre for FY24 as well. We believe current levels of crude prices will see an uptick, driven by steady re-opening of China and tight supply. However, given the counter forces of economic weakness in Europe and slowing demand in the US, prices may remain in a narrow range of $85-90 a barrel.”

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