New Delhi, Jul 2 (PTI) International crude oil prices may have fallen to a four-month low, but retail petrol and diesel prices in India are unlikely to be cut anytime soon as state-run refiners are still processing costlier crude purchased during the peak of the West Asia crisis, Oil Minister Hardeep Singh Puri said.
Petrol and diesel prices were raised by about Rs 7.50 per litre each in the second half of May – more than two months after the outbreak of the West Asia conflict and by less than the increase in global fuel costs – resulting in state-owned fuel retailers absorbing a significant portion of the higher crude prices.
The delayed and partial pass-through left Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) with substantial losses on the sale of petrol and diesel, even as international oil prices have since retreated.
Puri said state-owned fuel retailers incurred cumulative losses of Rs 74,781 crore on the sale of petrol, diesel and subsidised cooking gas (LPG). The figure includes losses from selling petrol and diesel below cost for four months following the outbreak of the West Asia conflict on February 28, as well as unrecovered LPG subsidies for the same period and earlier months.
International oil prices have retreated over the past two to three weeks after the United States and Iran signed an interim peace deal, easing concerns over the Strait of Hormuz – a critical energy shipping route used to transport oil and gas from Gulf producers. Crude oil prices have fallen from USD 119 per barrel at the peak of the conflict to around USD 70 now.
Puri, however, said refiners, who turn crude oil into fuels like petrol and diesel, are currently processing crude bought two or two and a half months back.
That crude was bought at high prices.
“That crude would have been obtained two months back (when) prices were high, cost of insurance was high, cost of freight was high,” he said. “Crude priced at current lower rates will arrive (at refineries) later.”
A fuel price cut can be looked at if oil prices remain at low levels for a sustained period, he said. “If it (oil prices) remains like this (at current rates), it (cutting retail prices) is a legitimate thing,” he said.
On Nayara Energy, India’s largest private fuel retailer, cutting petrol prices by Rs 5 per litre and diesel by Rs 3 per litre while state-owned firms have not followed suit, Puri said the company was effectively rolling back the increases it had implemented in March.
He added that Nayara subsequently matched every price increase undertaken by state-run retailers in May. The latest cuts, he said, have effectively brought Nayara’s retail fuel prices back in line with those of state-owned competitors.
Talking about how India managed the four-month period when the Iran war largely blocked access to Gulf producers, Puri said refiners diversified the sourcing of crude oil across continents and brought more LPG from the US.
The result was that no retail outlet in the country ran dry, even when countries in the neighbourhood rationed fuel.
“Every one of our refineries is stocked, every port, terminal, pipeline, and depot is stocked. In all, we have stocks to cover the country’s requirement for 76-80 days,” he said. “This is not to say that we don’t need additional (strategic) storage. We will be augmenting that.”
On price outlook, Puri said he is “not worried but we have to prepare for its stocking. That means increasing storage space and intensifying outreach to bilateral partners (for sourcing energy).”
