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OMCs have stopped absorbing the govt-mandated Re 1 cut on every litre of petrol/diesel

This essentially means that all the benefit incurred from the drop in crude oil prices is not being transferred to consumers

OMCs have stopped absorbing the govt-mandated Re 1 cut on every litre of petrol/diesel
OMCs have stopped absorbing the govt-mandated Re 1 cut on every litre of petrol/diesel

New Delhi: Following an over 36 percent fall in global crude oil prices in the last three months, oil marketing companies (OMCs) like Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have stopped absorbing the Re 1 cut mandated by the government on every litre of petrol and diesel, two industry insiders said. This essentially means that all the benefit incurred from the drop in crude oil prices is not being transferred to consumers. “We are no longer absorbing the mandated price cut. There is no need when crude oil prices have cooled off,” said one of the officials cited above. After witnessing backlash over rapidly rising fuel prices, the government had asked OMCs to absorb a cut of Re 1 per litre. The move could have dealt a blow worth Rs 9,000 crores on the companies’ margins over two quarters.

While crude oil accounts for about 90 percent of the cost of auto fuel and is a determinant factor in deciding their retail price, the prices of petrol and diesel are only linked to their prices in global markets.
“There is no direct co-relation between crude oil price and fuel retail price. Retail prices do not move in tandem with crude oil price. In October, crude oil dropped from $83 a barrel to $75.09 a barrel. OMCs have to contain volatility. So we only take a gradual price increase or decrease,” said the official quoted above. While crude oil accounts for about 90 percent of the cost of auto fuel and is a determinant factor in deciding their retail price, the prices of petrol and diesel are only linked to their prices in global markets.