According to a Business Standard report, the profitability of India’s OMCs is likely to come under renewed pressure after peace talks between the US and Iran ended without a breakthrough, a development analysts say could keep energy prices elevated.
As state-run OMCs have left fuel prices unchanged despite crude prices rising to over $100 per barrel, the firms are incurring steep under-recoveries of ₹24.40 per litre on petrol and ₹104.99 per litre on diesel at current retail selling prices, the report highlighted.
With Brent Crude trading above USD 100 per barrel, the focus of the OMC sector has been shifted from growth to survival/yield protection, believes Balaji Rao Mudili, research analyst, Bonanza.
“Since fuel prices in India are politically sensitive, they often cannot pass on the full cost of expensive crude to consumers. OMCs have maintained a comfortable margin when Brent is between $75–$85. At $100+, PSU OMCs are estimated to be losing approximately ₹104.99 per litre on diesel and ₹24.4 per litre on petrol as per the Ministry of Petroleum and Natural Gas. The
margins are likely to be volatile supported by the inventory gains in the short term but dragged down by marketing losses in the medium term if the government keep the retail price stagnant,” said Mudili.
