NEW DELHI : The union minister for petroleum and natural gas Hardeep Singh Puri on Wednesday said that the ministry will push for fiscal support to oil marketing companies (OMC) on the account of the losses incurred by them for selling petrol and diesel lower than the cost.
The statement comes at a when retail petrol and diesel prices have remained stagnant for around 165 days although international prices of crude oil have been highly volatile and elevated during the period.
Responding to a question on whether the ministry would make efforts to provide relief to OMCs for the losses incurred in petrol and diesel sale as in the case of LPG, the minister said: “The answer is an emphatic yes.” Further, noting that the losses and under-recoveries incurred by the OMCs impact their finances and credit ratings, the minister added: “Government is seized of the issue.”
State-owned Indian Oil Corporation (IOC) last week reported a net loss of ₹272.35 crore for July-September, the second straight quarter of loss due to selling petrol, diesel and cooking gas LPG at rates below cost. The net loss of ₹272.35 crore compared to a profit of ₹6,360.05 crore in July-September 2021, according to a company’s filing with the stock exchanges.
A report by Moody’s Investors Services last month showed that the Indian state-owned oil marketing companies (OMCs) have lost an estimated $6.5 billion-$7 billion on petrol and diesel sales due to a freeze on retail fuel prices between November 2021 and August 2022 and their earnings may remain weak this year as they are yet to be compensated for these losses.
Moody’s estimated that during the period under review IOCL’s revenue loss on petrol and diesel sales at $3.0 billion-$3.2 billion, while that for BPCL and HPCL is estimated at $1.6 billion-$1.9 billion.
On 12 October, the union cabinet approved a one-time payment of ₹22,000 crore to the OMCs to compensate them for their losses in selling cooking gas below cost. The grant will be distributed among Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL).
The minister further said that although retail fuel prices are now deregulated, the public sector OMCs have the “nation’s interest at heart”.
“A good corporate entity will realize that if I keep my consumer base going, he will also make money. He will make only something else,” he added.
The minister said that the government has been able to navigate the situation well amid the current global tensions and volatile market. Comparing the price movement of fuels globally with that in India, Puri said: “When petrol prices went up 43-46% in North America, ours went up only 2%.”
He exuded confidence that India will be able to navigate well through the situation both in terms of availability of energy and affordability.