Hardeep Singh Puri, the union minister for petroleum and natural gas, instructed Oil Marketing Companies (OMCs) on Sunday to lower the retail prices of petrol and diesel. The statement came in the aftermath of rising prices of crude oil in the world market decline. During a ceremony to mark a CNG-powered boat racing on the Ganga, Puri spoke with the media.
This event was planned ahead of Bengaluru’s upcoming India Energy Week. As soon as the price of oil stabilised internationally and the industry managed to recover at a subpar pace, the minister advised oil marketing businesses to lower their pricing.
Under-recovery is the practice of selling fuel below cost. Due to selling petrol and diesel below cost, Oil Marketing Companies suffered a loss of Rs. 21,200 crore. Although Oil Marketing Companies are free to adjust product pricing based on economics, in reality, political factors play a significant role in a price revision.
Despite the fluctuating prices of the Indian crude basket, minister Hardeep Singh Puri also asserted that the costs of petrol and diesel have been kept in check. The union minister said “One reason for keeping prices of petrol and diesel under check is the reduction in taxes. The central government revised the taxes twice between November 2021 and May 2022. Prices of petrol and diesel have not been revised since May 22, 2022, when the Finance Ministry cut Central Excise duty followed by a reduction in sales tax by many States."
However, at this time, India is boosting its imports from Russia while on the one hand, Brent crude prices have fallen to 88 USD per barrel from a high of 139 USD in March. Both of these together have an impact on the total cost of petrol imports, but losses persist, which appears to be the reason why oil marketing organisations are unable to lower prices.
An established oil marketing firm noted, “Concerning petrol, we are making a low single-digit gross profit. However, the profitability of petrol has suffered over the past 15 days as a result of cracks. Diesel sales, however, continue to make a double-digit gross loss." Once oil market companies report their results in the upcoming days, the gross amount of loss or profit for the third quarter will be known.
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