New Delhi: State-owned oil companies-Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd-have not changed petrol and diesel prices since April 2022.
Even though fuel prices were deregulated years ago, companies have continued to keep retail rates steady.
Losses Rise Sharply
Due to rising crude oil prices, companies are now losing about Rs 18 per litre on petrol and Rs 35 per litre on diesel, according to a report by Macquarie Group.
At the peak last month, total losses reached around Rs 2,400 crore per day. This has now reduced to about Rs 1,600 crore daily after some tax relief.
Impact of Global Crude Prices
Crude oil prices have been highly volatile. Prices crossed USD 100 per barrel after the Russia-Ukraine war, later dropped near USD 70, and then surged again to around USD 120 due to tensions involving Iran.
Every USD 10 increase in crude adds nearly Rs 6 per litre to losses.
Tax Cuts Offer Limited Relief
The government reduced excise duty by Rs 10 per litre on petrol and diesel in March. However, this benefit was not passed on to consumers and was used to reduce company losses.
Even if excise duty is fully removed, it may not fully cover current losses.
Possible Price Hike Ahead
Experts believe fuel prices may rise after elections in states like West Bengal and Tamil Nadu.
Companies are expected to report losses for the January–March quarter as earlier gains have been wiped out.
Big Risk for Economy
India imports about 88 percent of its crude oil, making it highly dependent on global markets. Higher oil prices can increase the fiscal deficit and widen the current account deficit.
A full rollback of fuel taxes could lead to a revenue loss of around USD 36 billion. Also, every USD 10 rise in crude may increase the deficit further.
With uncertainty in crude prices, oil companies’ earnings remain under pressure, and experts currently prefer investing in utility sectors over oil firms.
