Keeping fuel prices steady during turmoil comes with a price

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₹5 per litre," said Swarnendu Bhushan, co-head of research at Prabhudas Lilladher Pvt. Ltd. Shares of OMCs have been volatile over the past week; however, in the last one month, they have seen an uptrend.

IOCL shares have increased about 5% to ₹169.05, while those of BPCL and HPCL increased nearly 2% to ₹592.65 and ₹469 respectively. "The under-recovery on diesel is about a rupee, while in the case of petrol, they making handsome profits of about ₹3.2 per litre. However, if crude prices surge, OMCs may return to under-recoveries in petrol sales," Bhushan added.

Under-recovery is the notional loss or difference between the retail price of the fuel and the international price. An increase of $1 per barrel of crude necessitates a 50 paise increase in petrol price, Bhushan said, adding in case of a $6 increase, OMCs may witness under-recoveries. Prashant Vasisht, senior vice-president and co-group head, corporate ratings, ICRA, said, "Marketing margins have declined in April 2024 with the rise in oil prices along with reduction in retail selling prices from 15 March.

ICRA estimates that the OMCs’ net realization is higher by ₹2 per litre for petrol and marginal loss for diesel vis-a-vis international product prices in April 2024." OMCs had cut prices of both petrol and diesel by about ₹2 last month, just before the stare of the model code of conduct for the general election from 19 April to 1 June. Queries sent to the Indian Oil Corp. Ltd, Hindustan Petroleum Corp.

Ltd and Bharat Petroleum Corp. Ltd remained unanswered till press time. Vasisht of ICRA, however, added that the impact on marketing margins may be offset by healthy refining margins.