Price Hikes Narrow Losses For Fuel Retailers As West Asia Risks Roil Oil

(MENAFN- Live Mint) New Delhi: India's state-run oil marketing companies (OMCs) have reduced the losses on sale of petrol and diesel below market rates to ₹6 and ₹30 per litre, respectively, after the recent price increases.

The daily under-recovery for OMCs, including losses on liquefied petroleum gas (LPG) sales, is in the range of ₹600-700 crore, Praveen Khanooja, additional secretary in the ministry of petroleum and natural gas, said at a media briefing in the national capital on Monday.

The ongoing war in West Asia, where Iran and Israel once again traded air strikes following the 8 April ceasefire, has disrupted global oil supplies, leading to a surge in energy prices.

At a time when global LPG prices have soared and the country is facing a supply shortage, the government has reduced the number of cylinders provided to low-income consumers under the Pradhan Mantri Ujjwala Yojana to four from nine earlier.

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"The under-recovery on diesel is about ₹30 per litre. When you buy diesel in Delhi at ₹95, actually the balance ₹30 is borne by the company and for petrol its about ₹6 per litre, even now. And daily losses are still to the tune of ₹600-700 crore," Khanooja said.

Under-recovery refers to the notional loss incurred by oil marketing companies - when they sell petroleum products in the domestic market at prices below international rates.

In a statement on 27 March, the petroleum ministry had said that the under-recoveries on petrol were at around ₹26 per litre and ₹81.90 per litre on diesel. According to the government, the under-recovery on diesel went to as high as ₹100 a litre.

About ₹7.5 per litre

Since 14 May, the state-run OMCs - Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd, and Hindustan Petroleum Corp. Ltd-have increased petrol and diesel prices by about ₹7.5 per litre. Along with that, crude prices have also eased from the highs in April amid peace talks between Iran and the US, and are currently below $100 per.

On Monday, however, crude prices surged over 3% as the West Asia war escalated, with strikes by Israel in Southern Lebanon and retaliatory attacks by Iran on Israel.

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Market sentiment weakened after Israel's latest strikes on Lebanon reduced expectations of a US-Iran agreement and the reopening of the Strait of Hormuz, a key global oil transit route. Iran has maintained that a ceasefire in the region would include halt to attacks on Lebanon.

Crude prices, however, have eased after US president Donald Trump said both Iran and Israel are looking at an "immediate ceasefire".

Around 7.10 pm, the August futures contract of Brent on the Intercontinental Exchange was trading at $93.89 per barrel, 0.98% higher, while the July contract of West Texas Intermediate (WTI) was trading 1.07% higher at $94.06 per barrel.

Still in range

On the subsidy of LPG cylinders under Pradhan Mantri Ujjwala Yojana (PMUY), Khanooja said that average consumption of cooking gas under the scheme remains in the range of four to five cylinders and the subsidy of ₹1,200- ₹300 for four cylinder each-would be given to PMUY consumers.

Previously, PMUY consumers used to get nine cylinders in a year on a subsidised rate. He, however, did not clarify when the revised subsidy support came into effect.

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In a statement on Sunday, the petroleum ministry had said: "Ujjwala households will receive ₹300 a cylinder on the first four refills each year - ₹1,200 per beneficiary a year; and even a non-PMUY household will still be paying about ₹700 below the market cost of LPG."

On Sunday, the OMCs raised domestic LPG cylinder prices by ₹29. This was the second hike since the start of the West Asia war on 28 February. It comes after India's LPG consumption fell to 2.13 million tonnes in May, the lowest since the covid pandemic, and almost three months after oil companies hiked LPG prices by ₹60 a cylinder on 7 March.

After the latest revision, a 14.2-kg domestic LPG cylinder will now cost ₹942 in Delhi, ₹941.50 in Mumbai and ₹968 in Kolkata.

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