Indian Oil Companies Lose ₹1,000 Cr Daily; ₹50,000-Cr Hit Ahead?

As global crude prices remain above $100 per barrel, Indian Oil Marketing Companies (OMCs) are facing huge losses --- around ₹1000 crore a day to be exact. Despite the surge in global crude oil prices worldwide due to the conflict in West Asia, fuel prices in India have remain frozen.

These have been causing mounting pressure on the accounts of Indian OMCs such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd. (BPCL) and Hindustan Petroleum Corporation (HPCL) as they bear the brunt of increased crude prices.

The government, to its merit, has largely protected Indian consumers from the global energy crisis.

Who Bears the Fuel Price Burden?

ICRA estimates put negative market margins for Indian oil companies at ₹14 per litre on petrol and ₹18 per litre on diesel. For OMC’s the losses add up to ₹30,000 cr till April-end and may even exceed ₹50,000 cr by June-end.

The government has also reduced excise duty by ₹10 per litre on petrol and diesel that is costing the treasury around ₹14,000 cr a month or around ₹1,70,000 cr a year.

“Our oil marketing companies are buying expensive raw oil, gas and LPG from the market. But to protect our consumers, they are selling at low prices,” Sujata Sharma, joint secretary, ministry of petroleum and natural gas, said on Friday.

India is one of the only major economies that has not passed on the burden of increased oil prices to consumers. Countries such as China, the UK and Germany have increased oil prices up to 27%, while Spain, Japan and Italy have increased prices by over 30%.  

Purported Price Increase Ahead

According to a report by India Today, the government is planning a price increase before May 15. This comes amid the recent conclusion of elections to four major states.

The government had earlier also ruled out any financial assistance to OMCs that are incurring losses on selling petrol, diesel and aviation turbine fuel (ATF) below their cost.

This leaves increased prices as the only measure to provide relief to domestic oil companies who have come under increasing strain as the West Asia crisis continues.

Though the increased prices could have a cascading negative effect on the economy as increased fuel prices will lead to price rises across various key sectors. This will directly affect millions of Indian consumers.