The financial performance of India’s state-owned refining and marketing companies will remain weak as long as their net realised prices for petrol and diesel are lower than international market prices, Moody’s Investor Services said on Monday.
“Nonetheless, we do not expect this situation to be sustained. We expect that the Indian government will eventually allow fuel retailers to adjust selling prices, but the price increases will be implemented gradually,” it said.
Lending support to the government’s effort to contain inflation, PSUs like Indian Oil Corporation, 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.
Moody’s said despite high refining margins, refiners or fuel retailers that are subject to price ceilings because of government policies will reap limited benefits, without naming Indian OMCs.
“In the week through 24 June, Asia refining margins, as measured by the Singapore-Dubai hydrocracking margin, averaged at a multiyear high of $39 per barrel. Current margins are close to 20 times the average of around $2 per barrel in 2021. Refining margins are at super-cycle levels because of a shortage of transportation fuels, as demand outpaces supply in Asia,” it said.
Moody’s said the easing of movement restrictions this year has driven a strong recovery in demand for transportation fuels. At the same time, supply troubles have worsened on international sanctions on Russia that came after significant refinery closures during the pandemic. The mismatch in demand and supply has driven a surge in the margins of gasoline, gasoil and jet fuels.