IOC, BPCL, HPCL lost $2.25 billon in revenue due to fuel price freeze, says Moody’s!

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Fuel Prices ना बढ़ने की वजह से IOC, BPCL और HPCL ने कुल मिलाकर Nov’21 से Mar’22 के बीच में $2.25 Billion का revenue lose किया

Between November and first three weeks of March, India’s top fuel retailers IOC, BPCL and HPCL have together lost around $2.25 billion (Rs 19,000 crore) in revenue by keeping petrol and diesel prices unchanged despite a sharp rise in crude oil prices, Moody’s Investors Service said on Thursday.

The rating agency estimated that IOC’s revenue loss to be around $1-1.1 billion while that of BPCL and HPCL to be about $550-650 million each over the same period.

This equates to around 20 per cent of the combined FY2021 EBITDA for the three entities.

Petrol and diesel prices remained unchanged between November 4, 2021, and March 21 despite prices of crude oil (raw material for producing fuel) averaging around $111 per barrel in the first three weeks of March compared to around $82 in early November.

State-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation and Hindustan Petroleum Corporation (HPCL) on March 22 and 23 raised petrol and diesel prices by 80 paise per litre each but paused the increase on Thursday.

"Based on current market prices, the oil marketing companies are currently incurring a revenue loss of around $25 (over Rs 1,900) per barrel and $24 per barrel on sale of petrol and diesel, respectively,” Moody’s said in a report.

If crude oil prices continue to average around $111 a barrel, the three rated entities – IOC, BPCL and HPCL – will incur a combined daily loss of around $65-70 million on the sale of petrol and diesel unless fuel prices are increased to cover the rising crude oil prices

While fuel prices in India are deregulated and the refiners can pass on cost increases to the consumer, a steep price hike such as the one required under the current oil price environment will be in coordination with the government and may involve a reduction in excise duties.

Commenting on the two days of price increase, Moody’s said this underpins the expectation that the price increases will be gradual and occur over a period of time rather than being a one-time adjustment.

A sustained increase in crude oil prices will also result in inventory valuation gains for the refiners, which will partially mitigate the impact of lower selling prices.

Higher crude oil prices will also result in increased working capital requirements, resulting in incremental borrowings for the refiners.

Weaker earnings combined with higher borrowings will weaken the credit metrics of the downstream companies

High oil prices, however, will have a mixed impact on the sector.

While upstream oil and gas producers such as ONGC and OIL will benefit from higher earnings, downstream companies like IOC, BPCL and HPCL will be negatively impacted because of higher feedstock costs and increased working capital requirements.

A sustained high oil price environment will incentivise consumers to transition to other energy sources.

However, given India’s high fossil fuel dependency, growth potential and significant developmental needs, demand for oil and gas is likely to continue growing although consumption growth rates have started to slow.

As and when absolute demand starts to decline, India will first reduce imports before lowering domestic production

[HiteshKumar-bptf]

Govt is already getting all time high taxes revenue through petrol diesel they should reduce the taxes nd maintain the price or putting it into GST will be great