Centre Confirms No Proposal for Relief to State Oil Companies
State-run fuel retailers in India will not receive any government financial assistance to cover losses incurred from selling petrol, diesel, and aviation turbine fuel (ATF) below cost. The Ministry of Petroleum and Natural Gas confirmed that there are currently no proposals under consideration to support these companies, which include Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL). These firms are grappling with significant financial challenges due to a four-year freeze on fuel prices, even as crude oil prices have surged amid ongoing conflicts in the Middle East.
Challenges Faced by Oil Marketing Companies
The three major public sector oil marketing companies are under immense financial strain as they continue to sell petrol and diesel at prices that do not reflect the rising costs of crude oil. Despite the global price hikes, the retail prices of petrol and diesel have remained unchanged, resulting in under-recoveries estimated between Rs 25 to Rs 28 per litre. Additionally, these companies have started to incur losses on ATF sales, having only partially adjusted prices in response to the increased costs. The Joint Secretary of the Ministry, Sujata Sharma, emphasized that there is no current proposal for government support to alleviate these losses.
Price Adjustments and Consumer Impact
While domestic LPG prices were recently increased by Rs 60 per 14.2-kg cylinder, this adjustment still did not fully cover the rising input costs, leaving oil companies to absorb the losses. Historically, the government has provided subsidies to offset such under-recoveries, but no new relief measures are planned at this time. The government has opted to keep retail prices of petrol, diesel, and domestic LPG stable, despite supply disruptions linked to the Middle East conflict. Instead, price adjustments have been limited to bulk diesel and commercial LPG, which primarily affect industrial consumers.
Recent Price Changes in Aviation Fuel and LPG
On May 1, ATF prices for international airlines were raised by 5.33%, bringing the cost to $1,511.86 per kilolitre. This followed a significant increase in April when prices for foreign carriers more than doubled. In contrast, ATF prices for domestic airlines remain unchanged at Rs 1,04,927.18 per kilolitre, with public sector oil firms absorbing the higher global fuel costs. Furthermore, commercial LPG rates have seen sharp increases, with the price of a 19-kg cylinder used by hotels and restaurants rising to a record Rs 3,071.50. This adjustment narrows the gap with the price of a standard 14.2-kg domestic cylinder, which remains at Rs 913.
Inflation Control Measures
Sujata Sharma stated that the government’s approach aims to contain inflation while protecting consumers from the full impact of rising global energy prices. The decision to keep retail prices stable reflects a commitment to consumer interests, even as the oil marketing companies face mounting financial pressures. The government’s strategy appears focused on balancing the need for consumer protection with the realities of fluctuating global fuel costs, ensuring that the burden of rising prices does not fall entirely on the consumers.
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