The freeze on retail selling prices for auto fuel and LPG amid soaring commodity prices has led consolidated integrated auto-fuel margins for Indian oil marketing companies (OMCs) to a negative Rs 2-3/litre now, compared with the normative run rate of positive Rs 8-9/litre, brokerage firm Emkay Global Financial Services said.
“The Q1FY23 average is estimated to be a positive Rs 4-6/litre. LPG under-recoveries for Q1FY23 would also average at around Rs 300/cylinder, but a seasonal cut in Aramco June LPG has lowered the same to around Rs 100/cylinder for Jul’22,” said Sabri Hazarika, analyst of Emkay in a report.
The brokerage firm estimates adjusted under-recoveries of Rs 14,100 crore in auto-fuel and Rs 12,500 crore in LPG for the first quarter of the current fiscal. The current under-recovery run rate indicates an annualised hit of Rs 2 trillion that includes LPG and hence, retail selling price hikes are essential unless the Centre rolls back the deregulation itself.
“The continuing price freeze without any indication is worrying, though looking at past instances and the magnitude of current losses, we expect some solution in the form of a resumption of price hikes and/or subsidies,” Hazarika said.
Lending support to the government’s effort to contain inflation, PSUs like Indian Oil, Hindustan Petroleum and Bharat Petroleum have kept retail fuel prices on hold since May 22. The retail price of diesel and petrol in Delhi stands at Rs 89.62 and Rs 96.72 per litre respectively.