Petrol, diesel may get cheaper as OMCs become profitable: Report

Digital Desk: Petrol and diesel prices in India, stagnant for over a year, are expected to come down soon. The government is actively considering ways to pass on the benefits of softening global crude prices to consumers ahead of the 2024 Lok Sabha elections, as reported by ET Now.

In contrast to the peak losses experienced in 2022, oil marketing companies (OMCs) are now in a more favourable position. Currently, they are making a profit of ₹8-10 per litre on petrol and ₹3-4 per litre on diesel. The oil ministry has engaged in discussions with OMCs, exploring various crude versus retail price scenarios.

The government's impetus for contemplating a reduction in fuel prices stems from OMCs' improved profitability. The combined profit of major OMCs - IOC, HPCL, and BPCL - reached ₹28,000 crore in the last quarter, marking a substantial turnaround. With OMCs no longer facing under-recovery, the government believes it is opportune to pass on relief to consumers.

The finance ministry and the oil ministry are closely evaluating the current crude oil price scenario. Beyond OMC profitability, they are taking into account global factors influencing the oil market. Recent drops in oil prices have been attributed to concerns about reduced demand and uncertainty surrounding OPEC+ supply cuts.

A Reuters survey reported a decline in OPEC oil output in November, marking the first monthly drop since July. Lower shipments by Nigeria and Iraq, coupled with continued market-supported cuts by Saudi Arabia and other OPEC+ members, contributed to this reduction.

Analysts suggest that falling oil prices could positively impact India's inflation rates. Additionally, the decline is expected to benefit the Indian equity market, especially sectors reliant on crude oil as a raw material. Conversely, some sectors may face challenges due to the overall decrease in oil prices.

Overall, the expected reduction in petrol and diesel prices in India is a result of favourable global trends and the improved profitability of OMCs. As the government contemplates passing on these benefits to consumers, it remains to be seen how this potential relief will unfold in the coming months.