HPCL chief indicates market forces may slightly raise fuel prices

Company doubles consolidated net profit in third quarter

There may not be much relief in sight for consumers with petrol and diesel prices remaining high, driven by market forces, indicated Hindustan Petroleum Corporation (HPCL) Chairman and Managing Director, M K Surana.

Speaking at a press interaction after announcing the third quarter earnings for fiscal 2020-2021, Surana said, “The increase in crude oil price is because of the mismatch or the anticipated mismatch between the pick-up in demand and the capacity to ramp up the production immediately…On a long term or medium-term basis, we do not expect crude oil prices to go substantially high and we anticipate it to remain between $50 and $60 a barrel. To that extent, the fuel prices do factor in that type of range of crude prices.”

“The prices are expected to hover around less than $55 a barrel in the near future. While we may see momentary spikes leaning towards $60 a barrel, I think they lean more towards $55 a barrel, less towards $60,” he said.

Surana explained that there may be relief in the form of a stronger rupee through the exchange rate, but this can be dampened with a hike in international product prices.

“The two other elements related to product cracks and exchange rates will also come into the picture. The exchange rates had been moving for the better, as far as the country is concerned, so there may be some help there. But the product cracks (margins that the refineries make) have been quite low and there is a possibility of upward movement on MS (motor spirit or petrol) and HSD (High Speed Diesel) cracks as the demand picks up. Our efforts will be to ensure that we align the domestic prices to the international product prices,” he said.

“Petrol and diesel prices depend on international commodity prices and the actual product price, within the retail price is just 25 to 30 per cent, the rest is central and state taxes. Companies do not have much leeway in price, we can only moderate them to mitigate volatility. But the companies have no leeway to absorb price hikes over a time horizon…Oil companies will have no option but to pass on the price variations,” Surana added.

HPCL reported a steep increase in net profit for the third quarter of financial year 2020-2021. The higher profit is also on account of inventory, exchange gains and higher sales.

Consolidated net profit for the period stood at Rs 2,373.71 crore, up from Rs 1,027.23 crore in the same months of fiscal 2019-2020. Consolidated total income also reported an increase to Rs 78,324.98 crore, up from Rs 75,048.60 crore in the same quarter of fiscal 2019-2020.

Gross Refinery Margin (GRM), a measure of the gain per barrel of crude oil processed, stood at $1.87 per barrel for the October-December 2020 period as compared to $1.79 per barrel in the corresponding previous period.

Inventory gains in the quarter under review stood at Rs 1,323 crore compared to Rs 343 crore in the comparable quarter. HPCL also reported a currency exchange gain of Rs 297 crore compared to a gain of Rs 82 crore last year.

HPCL said that domestic sales of petroleum products increased to 10.03 million metric tonnes registering a growth of 2.7 per cent over the corresponding quarter of previous year compared to industry growth of 0.30 per cent. The sales of Petrol increased by 6.4 per cent, Diesel by 1.2 per cent and LPG or cooking gas by 5.9 per cent.

HPCL Q3 performance

Parameter

Q3 2020-2021

Q3 2019-2020

Consolidated Net profit

Rs 2,373.71 crore

Rs 1,027.23 crore

Consolidated Total Income

Rs 78,324.98 crore

Rs 75,048.60 crore

Gross Refinery Margin

$ 1.87 per barrel

$ 1.79 per barrel