Petrol, Diesel To Get Cheaper? Prices Could Be Reduced By Rs 5-10, Says Report

As the nation is prepping up for the big 2024 Lok Sabha polls, the state-run oil companies are considering reducing the prices of petrol and diesel, Hindustan Times reported citing people aware of the matter.

Once the third quarter results are out, the prices might be slashed by Rs 5-10, three people aware of the matter told the publication.

"Due to higher marketing margin on sale of fuels, the three OMCs (oil marketing companies) posted significant net profit in Q1 and Q2 [of FY2023-24] and the trend will continue in Q3. After results by the end of this month, they may consider reducing petrol and diesel rates between ₹5 and ₹10 a litre, keeping some cushion for future spike in international oil prices. A decision will be taken by the companies in consultations with their stakeholders," the daily quoted one of the people as saying.

The announcement might be made after the third quarter results are out. The net profits are expected to collectively exceed a record Rs 75,000 crore, despite a decline in the costs of acquiring crude oil, the report added.

The government holds a majority stake in all three OMCs. In the first half of the fiscal year 2023-24, the combined net profit of these three companies reached Rs 57,091.87 crore, marking a remarkable increase of over 4,917 per cent from the combined net profit of Rs 1,137.89 crore for the entire financial year of 2022-23.

The Central government had slashed Central Excise duty by a total of Rs 13 per litre on petrol and Rs 16 per litre on diesel in two stages, first in November 2021 and then in May 2022. These excise reductions were entirely passed on to consumers, leading to a decrease in retail prices.

The average oil prices of the Indian basket began a downward trend and fell below $100 in August 2022 ($97.4 a barrel). By March 2023, it further decreased to $78.54.

Nevertheless, there was a brief uptick in prices during two months of 2023-24 - September 2023 ($93.54) and October 2023 ($90.08). However, oil prices have consistently stayed below $90, significantly bolstering net profits for OMCs in the initial two quarters, the report added.

From September 2023 onwards, oil prices have moderated, reaching $83.46 a barrel in November and $77.42 in December 2023. Even in the current month (January 2024), the 15-day average stands at $77.8 per barrel.