State-owned oil marketing companies (OMCs) are poised to potentially slash fuel prices, buoyed by a strong fourth-quarter performance, according to Union Minister for Petroleum and Natural Gas, Hardeep Singh Puri. Speaking at the Indian Express Group's Idea Exchange program, Puri indicated that if OMCs sustain their robust earnings in Q4, consumers could anticipate a reduction in petrol and diesel prices, which have remained unchanged for nearly two years. Despite fluctuations in earnings amid global crude price volatility, OMCs have held fuel prices steady since May 2022.
Puri's remarks mark the first government acknowledgment that OMCs—Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL)—might adjust fuel prices downwards. Earlier reports suggested that a price cut might coincide with the upcoming general election in April, contingent on crude prices remaining below $80 per barrel.
Although auto fuel prices are ostensibly deregulated, there's speculation that state-run firms still lack complete pricing autonomy. However, OMCs have reported substantial year-on-year growth in consolidated net profits for the quarter ended December, primarily driven by robust marketing margins. Their combined consolidated net profit surged to Rs 13,119 crore, a significant rise from Rs 3,082 crore in the corresponding period last year.
Analysts anticipate OMCs to continue their profitable streak in Q4FY24, with expectations of healthy year-on-year and quarter-on-quarter growth. The government's decision not to provide budgetary equity support to OMCs in FY24, despite an initial allocation of Rs 30,000 crore, underscores the sector's improved profitability. The recent interim budget earmarked Rs 15,000 crore for equity infusion in OMCs in FY25, signaling continued government support.
Prashant Vasisht, Senior Vice President and Co-Group Head at ICRA, had previously highlighted the potential for fuel price cuts if crude prices remain below $80 per barrel. As OMCs maintain their financial strength, consumers may soon reap the benefits with possible reductions in petrol and diesel prices.
