Indian Oil Companies Make Big Profits as Crude Prices Drop
New Delhi [India], September 30: With crude prices going down, oil marketing companies (OMCs) are making huge profits by selling petrol and diesel. A recent report by ICRA says that OMCs like Indian Oil, Hindustan Petroleum, and Bharat Petroleum are making a profit of Rs 15/litre on petrol and Rs 12/litre on diesel.
Girishkumar Kadam, Senior Vice President and Group Head – Corporate Ratings at ICRA, stated, “ICRA estimates that the OMCs’ net realisation was higher by Rs.15/litre for petrol and Rs.12/litre for diesel vis-a-vis international product prices in September 2024 (till September 17). The retail selling price (RSPs) of these fuels have been unchanged since March 2024 (Rs. 2/litre was reduced on petrol and diesel on March 15, 2024).”
The marketing margins of OMCs have improved significantly as crude prices have declined in recent months. ICRA’s report supports this view, stating, “The marketing margins on retail sales of auto fuels for the Indian oil marketing companies (OMCs) have improved in recent weeks with the reduction in crude prices.”
Experts suggest that with such hefty marketing margins, OMCs have sufficient room to pass these profits to the consumers by reducing the prices of petrol and diesel.
Earlier, the Ministry of Petroleum and Natural Gas acknowledged that the state-owned oil marketing companies (OMCs) have had a fabulous financial year 2023-24. The ministry noted that the combined profit of OMCs for FY 2023-24 stood at Rs 86,000 crore, over 25 times higher than the extraordinarily difficult previous fiscal year.
For the full 2023-24 fiscal, HPCL (Hindustan Petroleum) reported a record net profit of Rs 16,014 crore as opposed to a loss of Rs 6,980 crore in the previous year. IOCL (Indian Oil) capped an excellent year with historically best refinery throughput, sales volume, and net profit. BPCL’s profit after tax for FY 2023-24 came in at Rs 26,673 crores, nearly 13 times higher than the previous fiscal year. Additionally, the company’s planned capital outlay of Rs 1.7 lakh crores over 5 years under ‘Project Aspire’ underlines its commitment to creating long-term value for shareholders.
Doubts Revealed
Crude Prices -: Crude prices refer to the cost of crude oil, which is the raw form of oil before it is processed into products like petrol and diesel.
Indian Oil -: Indian Oil is a major oil company in India that refines and sells petroleum products like petrol and diesel.
Hindustan Petroleum -: Hindustan Petroleum is another big oil company in India that deals with refining and selling petroleum products.
Bharat Petroleum -: Bharat Petroleum is also a large oil company in India, similar to Indian Oil and Hindustan Petroleum.
ICRA -: ICRA is a company that provides ratings and financial information about other companies. It helps people understand how well a company is doing financially.
Ministry of Petroleum and Natural Gas -: This is a part of the Indian government that looks after the production and distribution of petroleum and natural gas in the country.
FY 2023-24 -: FY stands for Fiscal Year, which is a one-year period that companies use for accounting purposes. FY 2023-24 means the financial year from 2023 to 2024.
Rs 86,000 crore -: Rs 86,000 crore is a way to express a very large amount of money in Indian currency. One crore is equal to 10 million, so 86,000 crore is a huge sum.
Marketing margins -: Marketing margins refer to the difference between the cost of producing a product and the price at which it is sold. High marketing margins mean the companies are making a lot of profit on each litre of petrol or diesel they sell.
