Mint Primer | Indian fuel prices: which way are they headed now?

livemint.com:

₹2 cut on 15 March 2024. Rising crude prices almost negates any scope of a further cut. Thanks to low prices in 2023-24, oil companies have been very profitable and have the cushion to absorb any temporary spike.

Though the code restricts the government from bringing any new policy or fiscal measure, revision of fuel prices does not fall under that category. So, oil marketing companies are technically free to raise or reduce prices as per their need. In 2019 for example, prices were marginally revised on a couple of occasions while elections were underway in the country.

Typically, OMCs break even when global crude oil prices are at $85 per barrel. Anything less and their profitability grows increasing the chances of a cut in pump prices. But any increase makes them unprofitable and strengthens the case for a price hike.

Thanks to benign prices for much of FY24, the three state-owned OMCs—IOC, BPCL and HPCL—posted a robust ₹69,000 crore net profit for Apr-Dec 2023, way higher than the profit for all of FY23, when prices were above $90 per barrel for much of the year. Central and state governments generate revenues from oil by way of excise and customs duties, cesses, royalty and VAT. The Centre also earns dividend from the OMCs as well as corporate/income tax from companies.