The Indian Government not agreeing to the price cap for Russian crude is leading to payment issues for downstream oil refiner, Hindustan Petroleum Corporation (HPCL In an interaction with Bloomberg, a company executive said that the company is currently facing issues on payment for Russian crude and is in talks for a term contract.
As per the company, payment for Russian crude is currently being done is US Dollar, UAE Dirham & the Ruble. The three fuel retailers are already losing money on sale of petrol & diesel despite softening international rates. Prices have remained unchanged, despite international crude prices shooting up to the highest level in over a decade.
In October last year, the government released Rs 220 billion to OMCs as part of a one-time compensation to make up for the losses they incurred on selling domestic cooking gas or LPG in two years, starting June 2020. The one-time compensation helped cushion the losses that the state-run refiners reported during the September quarter.
OMCs are pushing for a fuel price hike citing losses due to forex fluctuations and the depreciation of the rupee, which have put them under tremendous financial strain as the primary reasons for their request.
Sources told CNBC-TV18 that the losses incurred by the companies have prompted them to make a renewed pitch to the government for an increase in fuel prices. The losses suffered by companies such as Indian Oil Corporation (IOC) and Hindustan Petroleum Corporation Limited (HPCL) for the April to December period in FY23 were in excess of Rs 120 billion.
The basket of crude oil that India imports had shot up to $116 per barrel in June 2022 but is now hovering around $85. Contrary to expectations of a net loss of Rs 5.61 billion, HPCL reported a net profit of Rs 1.724 billion during the December quarter. Revenue of Rs 1090 billion was in-line with expectations. The company also reported an operating profit of Rs 16.717 billion during the quarter. All three oil refiners – Indian Oil, BPCL, and HPCL are currently trading with losses of up to 2 percent.