OMCs may cut down fuel prices next month: Report

State-run oil companies in India are considering a significant reduction in petrol and diesel prices next month following robust third-quarter results that are expected to surpass a combined net profit of ?75,000 crore.

Officials suggest that the OMCs may be sitting on margins of ?10 per litre, which could potentially be passed on to consumers. This move aims to alleviate inflation concerns and could have political ramifications ahead of the 2024 General Elections.

The government, as the promoter and majority stakeholder in all three OMCs, might witness a change in petrol and diesel rates, hinting at a possible reduction of ?5 to ?10 per litre.

Analysts project a continuation of the trend seen in the first two quarters of the financial year 2023-24 when the OMCs recorded significant profits due to higher marketing margins. The decision will be made after the release of the third-quarter results later this month, following consultations with stakeholders.

In the first half of the financial year 2023-24, the three state-run oil companies reported a combined net profit of ?57,091.87 crore, representing a 4,917 per cent increase compared to the entire financial year of 2022-23.

The net profits, likely to be revealed in the upcoming results, could influence the decision to decrease fuel prices. Hindustan Petroleum Corporation Ltd (HPCL) is scheduled to announce its Q3 results on January 27, while Indian Oil Corporation (IOC) and Bharat Petroleum Corporation Ltd (BPCL) are expected to follow suit around the same time.

Despite the government’s control over public sector OMCs, the companies have the flexibility to adjust fuel prices. The OMCs, holding a monopoly with over 90 per cent market share in domestic fuel retail, also influence pricing strategies adopted by private retailers.

The potential reduction in fuel prices is seen as a proactive measure to manage inflation, which rose marginally to a four-month high of 5.69 per cent in December 2023. Analysts expect the government to make all efforts to keep inflation below the Reserve Bank of India’s upper tolerance limit of 6 per cent.