Just ahead of the general elections, the state-run oil marketing companies (OMCs) are likely to reduce the retail prices of auto fuels, if their fourth-quarter earnings are supportive. Union minister for petroleum and natural gas Hardeep Singh Puri said on Friday: “The last three quarters’ profits (of OMCs) were good. If the fourth quarter (profits) are also good, then (they) could start looking at (cut in retail fuel prices). Then, there will be basis for that expectation (of price cut by consumers).”

The minister’s comment, while speaking at Indian Express Group’s Idea Exchange programme, is the first by a government functionary indicating that the OMCs – IOC- BPCL and HPCL– might lower the prices of diesel and petrol after keeping it steady for nearly two years. The firms have kept auto fuel prices unchanged since May 2022, even though the period saw their earnings fluctuate, due to the volatility of global crude prices.

FE had earlier reported that OMCs are likely to cut retail prices of petrol and diesel to some extent, just ahead of the general election scheduled in April if crude prices remain below $80 a barrel through this period.

The minister had earlier said that there hadn’t been any discussions between the government and the OMCs in this regard. Auto fuel prices are officially deregulated, but it is widely believed that the state-run firms don’t enjoy complete pricing freedom as yet.

The three companies reported a healthy year-on-year growth in consolidated net profits for the quarter ended December owing primarily to robust marketing margins. Their combined consolidated net profit for the quarter was Rs 13,119 crore, compared with just Rs 3,082 crore in the year-ago period.

According to analysts, the OMCs are likely to report a healthy YoY growth in their net profits for Q4FY24 as well. On a QoQ basis as well, the numbers are likely to rise, as they are unlikely to face further inventory loss in Q4FY24.

With the OMCs significantly improving their profitability,the government has decided not to provide any budgetary equity support to them in FY24, while a Rs 30,000 crore support was initially budgeted. The recent interim Budget has given an outlay of Rs 15,000 crore for equity infusion in OMCs in FY25.

“If crude prices remain under $80/bbl then there is room for a cut in auto fuel prices,” Prashant Vasisht, Senior Vice President, Co-Group Head, ICRA had earlier said.