Despite a massive rise in crude oil prices, India's top fuel retailers including IOC, BPCL and HPCL kept the prices unchanged, and it cost them $2.25 billion or ₹19,000 crore in revenues in March, latest report by Moody's Investors Service said.
Notably, despite strong predictions that fuel prices will see a major hike after the Assembly elections results for five states were announced, OMCs have refrained from raising fuel prices. At the same time, crude oil prices had risen averaging around $111 per barrel in the first three weeks of March. There was no change in fuel price from November 4, 2021, to March 21, 2022, while at the same time crude oil went from $82 per barrel to $111 per barrel.
The oil marketing companies raised the fuel prices for the first time in 2022 on March 22 and March 23 by $80 paise per litre each but no hike was seen on Thursday.
"Based on current market prices, the oil marketing companies are currently incurring a revenue loss of around USD 25 (over ₹1,900) per barrel and USD 24 per barrel on sale of petrol and diesel, respectively," Moody's said in a report.
Moody's expect that if crude oil prices will continue to average around $111 a barrel, the combined daily loss of IOC, BPCL and HPCL could rise to $65-70 million provided they raise fuel prices.
"Based on our estimates of average sales volume between November and first three weeks of March, the state-owned refining and marketing companies together have lost around USD 2.25 billion in revenue on petrol and diesel sales," Moody's said.
This equates to around 20 per cent of the combined FY2021 EBITDA for the three entities. In total, Moody's expect the revenue loss to be incurred by the three companies at $1-1.1 billion (IOC), BPCL ($550 million) and HPCL ($650 million).
"This loss in revenue will add to the short term borrowings, funded with working capital lines, of the refiners until such time that crude oil prices stay at elevated levels. Over time, the companies might be able to make up for some of these losses if oil prices come down," it added.
While fuel prices in India are deregulated and the refiners can pass on cost increases to the consumer, a steep price hike such as the one required under the current oil price environment will be in coordination with the government and may involve a reduction in excise duties.
Moody's also thinks the government will allow oil marketing companies to cover their losses by raising fuel prices. "We do expect that the government will allow the refiners to adjust prices appropriately and avoid a situation where refiners continue to make losses of this magnitude for a prolonged period," it said.
Petrol, diesel prices unchanged today:-
Petrol and diesel prices on Thursday witnessed a halt in changing rates following a two-day hike. On Wednesday, the fuel rates were hiked by 80 paise per litre for a second day, since the Oil Marketing Companies(OMCs) started the increase in petroleum products after a gap of more than four months. Today, petrol price in Delhi stood at ₹97.01 per litre while diesel rates have gone up to ₹88.27 per litre, according to a price notification of state-owned fuel retailers.
The cost of petrol in Mumbai is ₹111.67 per litre, same as yesterday and the price of diesel is ₹95.85 per litre. As for Kolkata, petrol and diesel continue to have the same cost as yesterday with petrol at ₹106.34 and diesel at ₹91.42 and in Chennai the petrol price today is at ₹102.91 and diesel at ₹92.95 respectively.
With PTI inputs
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IOC, BPCL, HPCL lost ₹19,000 cr in revenue due to fuel price freeze: Moody's - Mint
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