State-run oil giants such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) are raking in profits of INR 15 per litre on petrol and INR 12 per litre on diesel, a significant increase driven by declining crude prices, according to a recent report by ICRA.
"ICRA estimates that the OMCs' net realisation was higher by INR .15/litre for petrol and INR .12/litre for diesel vis-a-vis international product prices in September 2024 (till September 17). The retail selling price (RSPs) of these fuels have been unchanged since March 2024 ( INR . 2/litre was reduced on petrol and diesel on March 15,2024)," said Girishkumar Kadam, Senior Vice President and Group Head - Corporate Ratings, ICRA.
ICRA said recent reductions in crude prices have led to improved marketing margins on retail sales of auto fuels for Indian oil marketing companies..
Fuel prices in India have remained elevated for a couple of years now, with petrol still over INR 100 per litre in many states, and diesel hovering above INR 90 per litre. These prices have a direct impact on inflation, affecting industries ranging from transportation to aviation, and even daily essentials like cooking.
The financial performance of OMCs for FY 2023-24 has been stellar, with profits far exceeding the previous fiscal year's dismal results. The Ministry of Petroleum and Natural Gas recently confirmed a combined profit of INR 86,000 crore for the state-owned OMCs—25 times higher than the preceding year. HPCL reported a record net profit of INR 16,014 crore, a stark contrast to its INR 6,980 crore loss in FY 2022-23. BPCL’s profit after tax stood at INR 26,673 crore, nearly 13 times higher than the previous year, while IOC posted its best-ever refinery throughput, sales volume, and net profit.
Despite these stellar financials, Indian consumers have not yet seen any significant reduction in fuel prices, even though international crude prices have fallen to near three-year lows. Experts suggest that OMCs now have room to cut prices, potentially offering some relief to consumers ahead of upcoming state elections in Maharashtra and Haryana.
The price of crude oil has a direct impact on the profitability of fuel retailers, particularly the OMCs that control about 90% of India’s fuel retail market. As global crude prices have dropped, these companies have been able to widen their marketing margins. ICRA's report indicates that the marketing margins for OMCs have improved considerably in recent weeks, thanks to this dip in crude prices.
Earlier this month, Pankaj Jain, Secretary at the Ministry of Petroleum and Natural Gas, said the oil marketing companies that fuel price reductions could be considered if crude oil prices continue to stay low for an extended period. However, the general public remains skeptical, as previous declines in global oil prices did not lead to meaningful cuts in fuel prices in India.
In the full fiscal year of 2023-24, Hindustan Petroleum Corporation Limited (HPCL) achieved a record net profit of INR 16,014 crore, a significant turnaround from a loss of INR 6,980 crore the previous year.
Indian Oil Corporation Limited (IOCL) also marked a remarkable year, reporting its highest-ever refinery throughput, sales volume, and net profit.
Meanwhile, Bharat Petroleum Corporation Limited (BPCL) saw its profit after tax soar to INR 26,673 crore for FY 2023-24, nearly 13 times higher than the prior fiscal year. Additionally, BPCL's ambitious capital expenditure plan of INR 1.7 lakh crore over five years under 'Project Aspire' highlights its dedication to generating long-term value for its shareholders.
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