Diesel prices falling back to comfort zone; oil firms lockdown-month profits more than full year profits

Diesel prices in India have been gradually falling after surpassing the petrol price earlier this year. Diesel prices were cut by 8 paise on Tuesday, which is the fifth straight day of the downward revision. Diesel is now being sold at Rs 70.63 per litre, and the petrol price is unchanged at Rs 81.06 per litre [IN CITY], according to Indian Oil Corporation Limited (IOCL). In Mumbai, petrol and diesel rates were Rs 87.74 per litre and Rs 77.04 per litre respectively. Retail fuel prices are market-determined, and the PSU Oil Marketing Companies (OMCs) take appropriate decision on the pricing of petrol and diesel in line with international product prices and other market conditions.

Retail prices did not commensurate with global prices

While the price of the Indian basket of crude oil significantly fell during the lockdown, retail prices of fuel did not commensurate with the global prices. The Indian basket of crude oil was at $64.3 bbl in the month of January, which fell to $19.9 bbl in April, and again rose to $42.42 bbl till 9 September 2020, Dharmendra Pradhan, Minister of Petroleum and Natural Gas, said in a reply to a question in Lok Sabha.

OMCs’ profit in Q1 was more than last year’s annual profit

However, it is interesting to note that while India was reeling under severe stress in the first quarter of the current fiscal and the demand for petrol and diesel fell dramatically due to the lockdown restrictions, the profits of OMCs stood at elevated levels. The profit after tax of Indian Oil Corporation Limited (IOCL) and Hindustan Petroleum Corporation Limited (HPCL) in Q1 FY21 was more than their profits in the previous full year, according to the data provided in Lok Sabha. 

IOCL registered a profit of Rs 1,911 crore in Q1 FY21, compared to Rs 1,313 crore in FY20; and HPCL registered a profit of Rs 2,814 crore in Q1 FY21, compared to Rs 2,637 crore in FY20. PAT of Bharat Petroleum Corporation Limited (BPCL) also stood at higher levels. Meanwhile, Indian fuel prices are heavily loaded with taxes. Petrol attracts excise duty of Rs 32.98 per litre while diesel attracts Rs 31.83 per litre. On top of it, customs duty is 2.5 per cent on petrol and diesel and  3 per cent social welfare surcharge is added to it.