State oil refiners reap benefits of unrevised retail prices

Higher margin on petrol and diesel, with rupee rising and global crude price being steady

The three state-run oil marketing companies (OMCs) are likely to reap benefits of the lack of a price change in the past four fortnights. This is despite the Indian basket of crude oil prices declining by a little more than nine per cent in the previous fortnight itself, from $54.93 a barrel on March 1 to $49.72 on March 14.
 
According to industry experts, as on March 15, the over recovery on diesel was Rs 1.12 a litre; for petrol, Rs 1.61 a litre.
 
“With petrol unchanged at Rs 71.14 a litre, companies will earn a normalised marketing margin of Rs 3.67 a litre, higher by Rs 1.67 a litre, compared to the margin in the past fortnight. In the case of diesel, with prices unchanged at Rs 59.02 a litre, they will earn a normalised marketing margin of Rs 2.20 a litre, higher by Rs 1.12 a litre, compared to the past fortnight,” said Dhaval Joshi, research analyst, Emkay Global Financial Services.
 
The rupee had also strengthened in the past fortnight, from 66.95 a dollar on March 1 to 66.18 on March 14.
 
On March 21, the Indian basket of crude oil prices stood at $50.53 a barrel; the exchange rate was Rs 65.31 a dollar. Earlier, Indian industry was concerned after the petro exporters’ cartel, Organization of the Petroleum Exporting Countries (Opec), and 11 other exporters led by Russia said they’d cut crude oil production; prices were expected to go up. However, due to increased production of US shale, international prices remained $50-55 a barrel.
 
“Immediately after the Opec announcement, oil prices had run up significantly and India was in danger of increased inflation and fiscal deficit, if oil had gone beyond $65 a barrel. It is good to have oil correcting in the past few weeks because of global oversupply and the rupee getting stronger,” said Debasish Mishra, partner at Deloitte Touche Tohmatsu India.
 
Asked about the decision to not increase prices for four fortnights, a senior official from a state OMC said, “Our margins are based on internal calculations. We never had any negative margin. On the decision not to revise prices, it was not a political one; companies have the freedom for price revision.”
 

Cumulative crude oil production in India between April 2016 and February 2017 was 32,918 thousand million tonnes, 2.6 per cent and 2.8 per cent lower than the target and production during the corresponding period of last year, respectively.
 
Natural gas production in the period was 29,146.41 million standard cubic metres a day, nearly six per cent lower than the target and 1.9 per cent less than the production during the same period of last year.