Rising Fuel Prices: A Lifeline for Indian Oil Firms Amidst Heavy Losses
Oil Firms Were Losing Rs 1,600 Crore A Day. How Fuel Price Rise Will Help Them
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Indian oil marketing companies (OMCs) have been losing ₹1,600 crore (approximately $192 million USD) daily due to rising production costs exacerbated by geopolitical tensions. Recent fuel price hikes of ₹2.83 per litre for petrol and diesel are insufficient to cover the losses, necessitating larger increases to stabilize OMC finances.
- 01OMCs are currently losing ₹1,600 crore daily due to high production costs.
- 02Recent fuel price hikes are only partially alleviating the financial strain on OMCs.
- 03A significant price increase of ₹28 to ₹33 per litre is needed for OMCs to break even.
- 04The ongoing conflict in the Middle East has severely impacted global oil supplies, affecting prices in India.
- 05Government interventions, like reducing excise taxes, have temporarily eased pressures but are not sustainable.
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Indian oil marketing companies (OMCs) are facing severe financial losses, currently losing ₹1,600 crore (approximately $192 million USD) daily due to skyrocketing production costs. The recent increase in retail fuel prices by ₹2.83 per litre for petrol and diesel, and ₹2 per kilogram for compressed natural gas (CNG), is a response to these escalating costs driven by geopolitical tensions, particularly the ongoing conflict involving Iran. Despite these hikes, experts suggest that OMCs would need to raise prices by ₹28 to ₹33 per litre to fully cover their costs and eliminate losses. The situation has been exacerbated by a significant rise in crude oil prices, with benchmark Brent crude remaining above $100 per barrel, leading to a drastic increase in India’s crude basket cost from $69 per barrel to an average of $114.48 in April. The Indian government has attempted to alleviate some pressure on OMCs by reducing excise duties, but these measures have not translated into lower consumer prices. As the geopolitical situation continues to evolve, OMCs remain vulnerable to further losses, particularly if the conflict persists.
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The rising fuel prices will directly affect consumers, particularly low-income households and gig workers who rely heavily on fuel for their daily expenses.
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