New Delhi: Retail petrol and diesel prices in India are unlikely to be reduced in the near term even as international crude oil has slipped to a four-month low, because state-run refiners are still processing costlier crude bought at the height of the West Asia crisis, Oil Minister Hardeep Singh Puri said.
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Puri said refiners, which convert crude into fuels such as petrol and diesel, are currently running crude procured two to two-and-a-half months earlier, when prices were elevated.
"That crude would have been obtained two months back (when) prices were high, cost of insurance was high, cost of freight was high," he said. "Crude priced at current lower rates will arrive (at refineries) later."
A reduction in retail fuel prices could be considered if crude stays low for a sustained period, the minister said. "If it (oil prices) remains like this (at current rates), it (cutting retail prices) is a legitimate thing," he said.
Petrol and diesel prices were raised by about Rs 7.50 per litre each in the second half of May, more than two months after the West Asia conflict broke out, and by less than the increase in global fuel costs. As a result, state-owned fuel retailers passed on only a part of the higher crude cost.
The delayed and partial pass-through left Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) with substantial losses on petrol and diesel sales, even as international oil prices subsequently retreated.
Puri said state-owned fuel retailers booked cumulative losses of Rs 74,781 crore on the sale of petrol, diesel and subsidised cooking gas (LPG). The figure covers losses from selling petrol and diesel below cost for four months after the West Asia conflict began on February 28, along with unrecovered LPG subsidies for the same period and earlier months.
International oil prices have eased over the past two to three weeks after the United States and Iran signed an interim peace deal, calming concerns over the Strait of Hormuz, a critical shipping route for oil and gas from Gulf producers. Crude has fallen from USD 119 per barrel at the peak of the conflict to around USD 70 currently.
Addressing the decision by Nayara Energy, India's largest private fuel retailer, to cut petrol prices by Rs 5 per litre and diesel by Rs 3 per litre while state-owned firms held their prices, Puri said the company was effectively reversing the increases it had made in March.
He said Nayara had subsequently matched every price rise implemented by state-run retailers in May, and that its latest cuts had brought its retail fuel prices back in line with those of state-owned competitors.
On managing the four-month stretch when the conflict largely cut off access to Gulf producers, Puri said refiners diversified crude sourcing across continents and increased LPG imports from the United States. As a result, no retail outlet in the country ran dry, even as some neighbouring countries rationed fuel.
"Every one of our refineries is stocked, every port, terminal, pipeline, and depot is stocked. In all, we have stocks to cover the country's requirement for 76-80 days," he said. "This is not to say that we don't need additional (strategic) storage. We will be augmenting that."
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On the price outlook, Puri said he is "not worried but we have to prepare for its stocking. That means increasing storage space and intensifying outreach to bilateral partners (for sourcing energy)."
