A Hindustan Petroleum Corp. oil refinery in Mumbai.
| Photo Credit: BLOOMBERG

Hindustan Oil Exploration Company said it will engage in discussion with HPCL for redressing the issues. File.

BPCL posted a net profit of ₹22,449.32 crore in the 9-month period of current fiscal as compared to a loss of ₹4,607.64 crore in the same period last year.
| Photo Credit: The Hindu

State-owned fuel retailers Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) reported bumper profit totalling more than ₹69,000 crore in the first nine months of the current fiscal which far exceeded their annual earning in pre-oil crisis years.

The combined net profit of IOC, BPCL and HPCL in April-December FY24 was better than their annual earning of ₹39,356 crore in pre-oil crisis year, regulatory filings by them showed.

The retailers have resisted calls to revert to daily price revision and pass on softening in rates to consumers on grounds that prices continue to be extremely volatile — rising on one day and falling on the other — and that their past losses have not been fully recouped.

The three companies, which control roughly 90% of India’s fuel market, ‘voluntarily’ have not changed petrol, diesel and cooking gas (LPG) prices for almost two years now, resulting in losses when input cost was higher and profits when raw material prices were lower.

They posted a combined net loss of ₹21,201.18 crore during April-September 2022 despite accounting for ₹22,000 crore announced but not paid LPG subsidy for the previous two years.

Subsequent softening of international prices and government giving out LPG subsidy helped IOC and BPCL post annualised profit for 2022-23 (April 2022 to March 2023 ) but HPCL was in the red.

This fiscal year, things have changed dramatically. The three firms posted record earnings in the first two quarters (April-June and July-September) when international oil prices — against which domestic rates are benchmarked — almost halved to $72 a barrel from a year ago.

International prices rose again in the subsequent quarter to $90, leading to moderation of their earnings. But, on a year as a whole they had rich profits. “IOC in the first nine months of the current fiscal (April-December 2023) posted a standalone net profit of ₹34,781.15 crore,” according to the company’s regulatory filing.

This compared with ₹8,241.82 crore annual net profit in 2022-23. While the company could argue that FY23 was impacted by the oil crisis, the 9-month earnings are higher than even the pre-crisis years — ₹24,184 crore net profit in 2021-22 and ₹21,836 crore in 2020-21.

BPCL posted a net profit of ₹22,449.32 crore in the 9-month period of current fiscal as compared to a loss of ₹4,607.64 crore in the same period last year.

This profit was higher than ₹1,870.10 crore earning in 2022-23 and ₹8,788.73 crore in FY22. HPCL’s 9-month profit of ₹11,851.08 crore compared with a ₹8,974.03 crore loss in FY23 and a profit of ₹6,382.63 crore in 2021-22.

The fuel price freeze that began on April 6, 2022, had a loss as high as ₹17.4 a litre on petrol and ₹27.7 per litre on diesel for the week ended June 24, 2022. However, subsequent softening led to losses being eliminated. The three firms had a margin of ₹11 a litre on petrol and ₹6 on diesel last month.

According to Girishkumar Kadam, senior vice-president and group head, corporate ratings, ICRA Limited, the three oil marketing companies reported healthy operating margins in H1 FY24, recouping the losses incurred during FY2023.

“The aggregate operating profitability of the OMCs was ₹90,000 crore in H1 FY2024 against a loss of ₹14,600 crore in H1 FY2023.” International oil prices have been turbulent in the last couple of years. It dipped into the negative zone at the start of the pandemic in 2020 and swung wildly in 2022 — climbing to a 14-year high of nearly $140 per barrel in March 2022 after Russia invaded Ukraine, before sliding on weaker demand from top importer China and worries of an economic contraction. But for a nation that is 85% dependent on imports, the spike meant adding to already elevated levels of inflation and derailing the economic recovery from the pandemic.

So the three fuel retailers froze petrol and diesel prices for the longest duration in the last two decades. They stopped daily price revision in early November 2021 when rates across the country hit an all-time high, prompting the government to roll back a part of the excise duty hike it had effected during the pandemic to take advantage of low oil prices.

The freeze continued into 2022 but the war-led spike in international oil prices prompted a ₹10 a litre hike in petrol and diesel prices from mid-March 2022 before another round of excise duty cut rolled back all of the ₹13 a litre and ₹16 a litre increase in taxes on petrol and diesel done during the pandemic. That followed the current price freeze which began on April 6, 2022 and still continues.

Petrol sales fell 8 per cent to 1.19 million tonnes in the first fortnight of August 2023, when compared with the same period last year. File photo
| Photo Credit: Nagara Gopal

India’s petrol and diesel consumption fell in the first half of August from the previous month and a year ago, as monsoon rains hit mobility and slowed industrial activity, preliminary data of state-owned firms showed on Wednesday, August 16, 2023.

This is the second month in a row that fuel sales have fallen. The four months of monsoon generally see muted consumption.

Also read: PM Modi rolls out 20% ethanol-blended petrol in 11 States/UTs

Consumption of diesel, the most consumed fuel in the country accounting for about two-fifths of the demand, fell 5.7 per cent to 2.67 million tonnes from August 1 to 15, compared to the year-ago period.

Consumption had fallen by a steep 15 per cent in the first half of July but picked up in the second fortnight.

Month-on-month sales fell 9.5 per cent, when compared with 2.95 million tonnes of diesel consumed in the first half of July.

Diesel sales typically fall in monsoon months as rains lower demand in the agriculture sector which uses the fuel for irrigation, harvesting and transportation. Also, rains slow vehicular movements.

Consumption of diesel had soared 6.7 per cent and 9.3 per cent in April and May, respectively as agriculture demand picked up and cars yanked up air-conditioning to beat the summer heat. It started to taper in the second half of June after the monsoon set in.

Petrol sales fell 8 per cent to 1.19 million tonnes in the first fortnight of August, when compared with the same period last year.

Consumption had dropped 10.5 per cent in the first fortnight of July but picked up in the latter half. Sales were down 5.2 per cent month-on-month, the data showed.

India’s economy has demonstrated remarkable resilience and is likely to have surpassed the performance of most major economies during the first half of 2023.

With steady and healthy economic activity and ongoing air travel recovery, India’s demand for oil products is anticipated to remain strong in the remainder of the fiscal, analysts said.

Consumption of petrol during August 1-15, was 20.6 per cent more than in the COVID-marred first half of August 2021 and 25.6 per cent more than in pre-pandemic August 2019.

Diesel consumption was up 26 per cent over August 1-15, 2021 and 16.8 per cent when compared with August 1-15, 2019.

Rise in ATF demand

With the continuing rise in passenger traffic at airports, jet fuel (ATF) demand rose 8.1 per cent to 290,300 tonnes during the first fortnight of August as compared to the same period last year.

It was 66.7 per cent more than in August 2021, but 4.1 per cent lower than pre-COVID August 2019.

Month-on-month jet fuel sales fell 2.1 per cent when compared with 296,500 tonnes in July 1-15, 2023.

Cooking gas LPG sales were up 3.7 per cent year-on-year to 1.21 million tonnes in August 1-15. LPG consumption was almost 12 per cent higher than in August 1-15, 2021 and 11.2 per cent more than pre-COVID August 1-15, 2019.

Month-on-month, LPG demand was however down 2 per cent compared to 1.23 million tonnes of LPG consumption during July 1-15, the data showed.