With fuel prices remaining unchanged for almost two months despite a rise in costs, oil companies have started detailing under-recoveries, or losses, which are as high as ₹17.1 per litre on petrol and ₹20.4 on diesel as of Thursday.
Oil Minister Hardeep Singh Puri said fuel retailers had knocked on the doors of the government seeking ‘relief’, but hastened to add that pricing was ‘their decision’.
While refusing to comment on reports of private oil refiners making a killing on importing Russian crude oil at deep discounts and exporting refined petroleum products to the U.S., the Minister said the Finance Ministry was the appropriate authority to decide on the levy of a windfall tax on high gains the oil and gas producers are making due to the surge in international energy prices.
“All our corporate citizens have a sense of responsibility,” he told a news conference here. “These actions (revision in fuel prices) are taken by companies.” Oil firms, he said, do not come to him for consultations on revising fuel prices.
Local pump rates are benchmarked to about $85 per barrel crude oil price while Brent is currently trading at $113. This has resulted in a gap between cost and selling price, referred to as under-recovery, or loss.
“They (oil companies) are talking under-recoveries. They are talking about that. As I said, they are responsible corporate citizens and they will take whatever decision they have to,” Mr. Puri said. “Yes they come to us, it is an open secret. They come to us and say we need relief here, we need relief there but ultimately it (pricing) is their decision.”
He did not elaborate on the relief that oil firms had sought.
Despite a surge in oil prices, state-owned Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd. (HPCL) and Bharat Petroleum Corporation Ltd. (BPCL) first froze petrol and diesel rates for a record 137 days beginning in early November 2021 when five States including Uttar Pradesh went to the polls and then went into a hiatus again in April, which is now 57 days old.
The government last month cut excise duty on petrol by ₹8 per litre and by ₹6 on diesel. This reduction was passed on to consumers and not adjusted against the under-recovery or losses oil firms make on selling petrol and diesel.
While state-owned oil marketing companies (OMCs) have maintained retail operations despite losses, private sector retailers like Reliance-BP and Nayara Energy have curtailed operations to cut losses.
This curtailment has met with criticism in some sections, which point out that the two firms were exporting at a profit rather than selling to the domestic market.
While Reliance BP Mobility Ltd. – a joint venture between Reliance Industries and the U.K.’s BP – is a standalone fuel marketing company which has 1,459 petrol pumps in the country. The Indian partner owns twin oil refineries at Jamnagar in Gujarat, with one of them being licensed only to export.
Rosneft-backed Nayara Energy too has an oil refinery at Vadinar in Gujarat.
Asked to comment on reports of the private sector refiners making a killing on importing Russian crude available at deep discounts and then exporting the finished products to the U.S. and other countries, Mr. Puri said it was hard to say crude oil from which country went into a giant refinery for processing and the product exported is from which crude oil.
“Is Russian crude coming into a private refinery and going to the U.S. (as finished product)? I would never be able to find. There is no possibility,” he said.
However, private refiners not selling in the domestic market was “a legitimate question” to ask but he would not comment on the issue or advise them through the press, Mr. Puri said.
“My primary responsibility as line minister is to make sure petrol and diesel are made available,” he said. “Many of our entities are both producers, importers and exporters. That is a thing you must realise.”
On the issue of imposing a windfall tax like what the U.K. did last week, he said the issue fell in the domain of the Finance Ministry.
“It is a Finance Ministry issue. But I would think that our present focus is on ensuring that we get access to energy at secure and affordable prices. That is the main thing,” he said.
Exports, he said, would take place. “We import crude from one country, to the same country we export high-speed diesel. These are processes which go on. Rest is all speculative.”
Asked about any move to tax petroleum product exports, he said it was again a Finance Ministry issue.
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