International oil prices hit their lowest level in six months, helping Indian fuel retailers break even on gasoline, but officials said they were still losing money on diesel – the most used fuel in the country.
The world’s best-known benchmark crude, Brent, traded at $94.91 a barrel on Thursday after fears of a global recession sent it down to a six-month low of $91.51 a month. standby.
The current rates relieve India, which depends 85% on imports to meet its oil needs.
Falling prices mean fuel retailers such as Indian Oil Corporation are now breaking even on gasoline, but there are some losses on diesel, officials with knowledge of the matter said.
State-owned fuel distributors IOC, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have not exercised their right to adjust the retail price of petrol and diesel according to international costs for four and a half months now to help the government deal with runaway inflation.
At one point they were losing Rs 20-25 per liter on diesel and Rs 14-18 per liter on petrol as
international oil prices soared. These losses have been reduced with the fall in oil prices.
“There is no under-recovery (losses) on gasoline now. For diesel, it will take some time to get to that level,” an official said.
But that is unlikely to translate into an immediate rate cut as oil companies will be allowed to recoup losses they have accrued by selling fuel below cost over the past five months, it said. another manager.
Diesel under-recovery is now reduced to Rs 4-5 per litre.
IOC, BPCL and HPCL are expected to revise the retail price of gasoline and diesel daily based on cost. But they froze rates for a record 137 days starting Nov. 4, 2021, just as states like Uttar Pradesh went to the polls.
This freeze ended on March 22 this year and tariffs rose by Rs 10 per liter each just over a fortnight before a new freeze came into effect on April 7.
Petrol currently costs Rs 96.72 per liter and diesel Rs 89.62 in the nation’s capital. This is down from the price of Rs 105.41 per liter on April 6 for petrol and Rs 96.67 per liter for diesel as the government reduced excise duties to cool fuels. prices.
The increase of Rs 10 per litre, made between March 22 and April 6, was not enough to cover the cost and the new freeze meant more losses accrued, officials said.
Oil companies did not revise their rates to help the government manage inflation which had already peaked at a multi-year high. It would have increased further if gasoline and diesel prices had risen in line with costs.
Last week in Panipat, Petroleum Minister Hardeep Singh Puri called state-owned fuel retailers “good corporate citizens” for not raising prices.
But the freeze meant the three retailers posted a combined net loss of Rs 18,480 crore in the June quarter.
Gasoline was deregulated in June 2010 and diesel in November 2014. Since then, the government has not paid any subsidies to oil companies to compensate them for any losses they might incur by selling fuel at prices below cost.
Thus, oil companies recoup losses when input costs fall, the first official explained.
Russia’s invasion of Ukraine on February 24 sent shock waves through global energy markets.
Initial price spikes turned into persistent price increases as the global community imposed sanctions on Russia’s key exports. Brent was at $90.21 a barrel before the invasion and hit a 14-year high of $140 on March 6.
In recent weeks, some of the heat has flowed out of oil markets on fears of a recession that would reduce demand.
India’s crude oil import basket averaged $91.45 a barrel on Wednesday, official data showed.
It averaged $102.97 in April before climbing to $109.51 the following month and $116.01 in June.
Prices started falling in July when the Indian basket averaged $105.49 a barrel. It averaged $97.19 in August.
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