IOC, HPCL and BPCL free to set their own fuel prices, says India's oil minister

May 23,2022

IOC, HPCL and BPCL free to set their own fuel prices, says India's oil minister

Oil marketing companies such as Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) are free to set their own fuel prices, said Hardeep Singh Puri, Minister of Petroleum and Natural Gas.

The minister's comment came after the Centre announced a cut in excise duty on petrol by Rs 8 per litre and on diesel by Rs 6 per litre on Saturday.

"They (OMCs) are very strong stakeholders in our system and clearly, they do their own decision making," said Puri in an exclusive interview with CNBC-TV18, on the sidelines of the World Economic Forum Annual Meeting 2022.

"Now, obviously, if they have under-recovery in one area — and this is for them to answer — maybe because they make up in petrochemicals or in refining and other areas, they are able to do it. But you know, it is not for me, as the Minister for petroleum and natural gas, to have to tell them what they can do and what they can't do," Puri said.

OMCs fell on Monday after the government's decision of reducing excise duty on fuel and giving subsidy of Rs 200 on gas cylinders.

“At this stage it will be incorrect on my part to comment whether the OMCs will raise or not raise. I can only say that probably the excise duty rate card may help in or give some flexibility in the day-to-day management of the prices and it may also help a little bit on the working capital management. But how it needs to be handled, which way prices should be directed... that probably the OMCs have to decide," said MK Surana, CMD, HPCL.

Harshvardhan Dole, VP-Institutional Equities, IIFL, said the OMCs have incurred significant inventory losses and added the excise duty cut will incur a loss of almost Rs 5,000 crore for the companies collectively. "Big question marks as to how the government will let these OMCs recoup these losses and essentially take price increases and compensate on the LPG losses," he said.

Puri added that the excise duty cut on petrol and diesel is, in a sense, a sequel to the November reductions.

"On the decision, which was taken yesterday, I would like to remind you that this is in a sense, a sequel. Earlier, a decision was taken on November 4 last year because of the Prime Minister's considered and very well thought through assessment that the burden on the common man, the Aam Aadmi needed to be addressed,” Puri said.

He said that Prime Minister Narendra Modi took the decision of petrol and diesel excise duty cut based on inputs he received from various stakeholders within the system.

Samir Arora, Founder and Fund Manager, Helios Capital said that the excise duty cut cannot change much from a macro point of view.

"We are talking only about the month of May. Oil prices are up more than 5 percent, which means if you were to give 5 percent back in terms of price cut effectively through excise cut or any duty cut, basically just takes you back to April 30. Separately, we know that the oil marketing companies themselves are sitting on a huge shortfall. So in theory, maybe one reason for doing this is to make sure that the oil companies at least are able to get some slight increase, and effectively instead of government getting the money, the OMCs get it," he said.