Price hikes narrow losses for fuel retailers as West Asia risks roil oil

Price hikes narrow fuel retailers’ losses amid regional tensions

Theindiapostdaily.com – India’s public sector oil marketing companies (OMCs) have managed to cut their financial shortfall on selling petrol and diesel below international prices, reducing the deficit to ₹6 and ₹30 per litre, respectively. This follows recent adjustments to fuel pricing, which have helped alleviate some of the earlier pressure on the companies’ balance sheets.

Minister highlights persistent under-recovery

Praveen Khanooja, an additional secretary in the Petroleum and Natural Gas Ministry, stated during a Monday press conference in New Delhi that OMCs continue to face daily under-recovery of ₹600-700 crore. This figure includes losses from liquefied petroleum gas (LPG) sales, which remain a significant factor in the overall financial strain.

“The under-recovery on diesel is about ₹30 per litre. When you buy diesel in Delhi at ₹95, actually the balance ₹30 is borne by the company. For petrol, it’s around ₹6 per litre, even now. And daily losses are still to the tune of ₹600-700 crore,” Khanooja explained.

The ongoing conflict in West Asia, where Iran and Israel exchanged air strikes after the 8 April ceasefire, has disrupted global oil markets. This has led to a sharp rise in energy prices, compounding the challenges for OMCs already grappling with domestic supply constraints.

Government adjusts LPG support under Ujjwala scheme

With LPG prices climbing and domestic shortages emerging, the government modified the number of subsidized cylinders available to low-income users under the Pradhan Mantri Ujjwala Yojana (PMUY). The quota was reduced from nine to four cylinders annually, affecting the subsidy structure.

Previously, beneficiaries received nine cylinders at a discounted rate. The ministry clarified that the revised subsidy of ₹300 per cylinder will apply to the first four refills each year, totaling ₹1,200 per household annually. Non-PMUY users, meanwhile, still pay ₹700 less than the market rate for LPG.

On Sunday, OMCs raised domestic LPG cylinder prices by ₹29, marking the second increase since the war began in West Asia on 28 February. This follows a prior hike of ₹60 per cylinder on 7 March, which occurred amid declining LPG consumption—falling to 2.13 million tonnes in May, the lowest since the pandemic.

Crude prices fluctuate with geopolitical developments

Crude oil prices initially dipped after peace talks between Iran and the US, but surged over 3% on Monday as the conflict escalated. Israeli strikes in Southern Lebanon and retaliatory actions by Iran against Israel have intensified market uncertainty.

Iran insisted that a ceasefire would include a halt to attacks on Lebanon, yet the recent strikes have dented optimism for a US-Iran agreement. President Donald Trump’s call for an “immediate ceasefire” has since eased crude prices, though they remain below $100 per barrel.

The August futures contract for Brent crude on the Intercontinental Exchange rose to $93.89 per barrel, a 0.98% increase, while the July WTI contract climbed 1.07% to $94.06 per barrel. These figures reflect the current volatility in global oil markets.