Shares of India's major oil marketing companies (OMCs), including Bharat Petroleum Corporation Ltd (BPCL), Indian Oil Corporation Ltd (IOC), and Hindustan Petroleum Corporation Ltd (HPCL), are anticipated to react to the government's recent decision to increase petrol and diesel prices by Rs 3 per litre across the nation.
This hike, while offering some relief, falls short of analysts' expectations and the substantial increase needed to fully address the OMCs' significant under-recoveries. Emkay Global, for instance, has estimated under-recoveries at Rs 17-18 per litre at current crude levels, even after previous excise duty cuts. These under-recoveries have led to quarterly losses for OMCs, reaching an estimated Rs 57,000-58,000 crore.
Under-Recoveries Persist Despite Price Adjustment
Prior to the announcement, some reports had anticipated a larger Rs 5 per litre increase. However, industry analysts suggest that an increase of Rs 15-20 per litre is truly necessary for OMCs to cease incurring losses on fuel sales. The current Rs 3 hike is seen as a partial measure.
The impact of fuel price adjustments extends beyond the OMCs. Nomura had previously indicated that a 5 percent increase in petrol and diesel prices, which together hold a 4.8 percent weighting in India’s Consumer Price Index (CPI) basket, could add approximately 25-30 basis points to headline inflation.
New Fuel Prices Across Major Cities
Following the hike, fuel prices in major Indian metros have adjusted:
- Delhi: Petrol rose to Rs 97.77 per litre (from Rs 94.77), and diesel increased to Rs 90.67 (from Rs 87.67).
- Kolkata: Petrol is now Rs 108.74 per litre, and diesel is Rs 95.13 per litre.
- Mumbai: Petrol reached Rs 106.68 per litre, with diesel at Rs 93.14 per litre.
- Chennai: Petrol is priced at Rs 103.67 per litre, and diesel at Rs 95.25 per litre.
Increases in other cities ranged between Rs 2.83 and Rs 3.29 per litre.
Sujata Sharma, Joint Secretary at the Ministry of Petroleum and Natural Gas (MoPNG), recently highlighted during an Inter-Ministerial briefing that OMCs in India had been absorbing at least Rs 30,000 crore monthly due to massive under-recoveries on petrol, diesel, and LPG. She noted that despite high international crude and gas prices, the government has ensured uninterrupted domestic supply without rationing.