Oil marketing companies seeking ‘relief’ as under-recoveries mount: Hardeep Singh Puri

Another round of hike in fuel prices by Oil Marketing Companies (OMCs) may happen in the near future. Petroleum and Natural Gas Minister Hardeep Singh Puri said on Thursday that state-run fuel retailers have knocked on the doors of the government seeking “relief”, while adding that “pricing is their decision”.

Retail fuel prices have been on hold for the past seven weeks even as crude oil prices continued to rise. The recent reduction in compounded taxes by the Center – in the form of additional excise duty and cess – has brought some relief to consumers, but OMCs’ margins remain under pressure.

The minister declined to comment on reports of private oil refiners killing themselves on imports of Russian crude oil at steep discounts and exports of refined petroleum products to the US. He said that the Finance Ministry was the appropriate authority to take the decision to impose unexpected tax on high profits accruing to oil and gas producers on account of the jump in international energy prices.

Puri said: “Our current focus is to ensure that we get energy at safe and affordable prices. That’s the main thing.”

Analysts said that though it is clear that upstream oil companies have made windfall gains due to rise in global crude oil prices, it is difficult to calculate windfall gains to companies as they stopped sharing data with them Is.

“There is a sense of responsibility among all our corporate citizens,” PTI quoted the minister as saying. “These actions (revision of fuel prices) are done by companies.” He said oil companies do not come to him for consultation on revising fuel prices.

The local pump rates have been benchmarked to the crude oil price of around $85 a barrel while Brent is currently trading at $113 a barrel. This has resulted in a difference between the cost and the selling price, which is called an under-recovery or loss. The industry was losing Rs 17.1 per liter till June 2. petrol and Rs 20.4 on diesel.

Despite the jump in oil prices, state-owned Indian Oil, Hindustan Petroleum and Bharat Petroleum Petrol and diesel rates fell for a record 137 days, first in early November 2021, when elections were held in five states, including Uttar Pradesh, and then again in April in a hiatus that is now 57 days old.

The government had last month cut excise duty on petrol by Rs 8 per liter and on diesel by Rs 6. This shortfall was passed on to consumers and was not adjusted against under-recoveries or losses caused to oil companies on selling petrol and diesel.

While state-owned OMCs have maintained retail operations despite losses, private sector retailers such as Reliance-BP and Naira Energy Operations have been cut to reduce losses. The cut has faced criticism from some sections, who say that both the companies are exporting at a profit instead of selling in the domestic market.