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Oil Firms Face Heavy Losses; Govt May Review Petrol-Diesel Prices Soon
Crisis: Despite fluctuations in crude oil prices, petrol and diesel prices remain stable, increasing pressure on state-owned oil companies. Reports indicate that companies are incurring heavy losses per liter and are expected to incur losses in the March quarter, which could impact the economy and banking sector.
The government may look into the prices of petrol and diesel after the elections. Despite fluctuating global prices for crude oil, the government-owned oil marketing firms have kept their prices for retail sale of petrol and diesel unchanged, which is impacting their bottom lines. Oil companies are facing losses of ₹18 per litre in the case of petrol and even more than ₹35 per litre in diesel sales. Losses recorded during the month of March may wipe out all the profits made earlier in January and February.
According to a report by financial services company Macquarie, if crude oil prices remain at $135-165 per barrel, this loss is expected to increase further. Every $10 increase in crude oil prices could increase the loss by approximately ₹6 per liter. Indian Oil, Bharat Petroleum, and Hindustan Petroleum have not changed retail prices after April 2022. As of March, the combined daily loss of the three companies was approximately ₹2,400 crore. Following the central government's excise duty cut of ₹10 per liter, this loss has declined to approximately ₹1,600 crore per day.
India's strong economic fundamentals can largely absorb the impact of crude oil shocks. However, if the average price remains around $130 per barrel, the country's economic growth rate could decline by approximately 0.8 percent. According to rating agency S&P, the operating income of oil companies could decline by 15 to 25 percent during 2026-27. This could increase pressure on corporate lending and the banking sector, with bank NPAs rising to 3.5%.
