New Delhi: Petrol and diesel prices will not be increased for now despite international crude oil rates crossing USD 100 per barrel, government sources said on Monday, even as authorities stepped up efforts to maintain uninterrupted fuel supply lines across the country.
As the conflict in West Asia entered the tenth day, world markets plummeted, and Brent crude oil, the international standard, surged to nearly USD 120 a barrel, about 65 per cent higher than when the war started, before retreating.
Top government sources said the government is closely monitoring global oil markets, but there is no immediate plan to raise retail fuel prices. Oil marketing companies are expected to absorb the current cost pressure for the time being.
While the country has adequate stocks of both raw material (crude oil) and finished products (fuels) to meet requirements for the next 6-8 weeks, the government has tweaked the policy for ordering a cooking gas LPG refill.
The minimum gap for booking a domestic LPG refill has been increased to 25 days from the current 21 days, a move aimed at preventing hoarding and ensuring equitable distribution of cylinders.
Sources said the minimum waiting period for booking a domestic LPG cylinder refill increased from 21 days to 25 days to prevent hoarding.
Average households consume 7-8 LPG cylinders of 14.2 kg in a year and should normally not need a refill in less than 6 weeks, they said, adding the refill booking period has been increased to prevent hoarding and creation of artificial scarcity in the market.
The oil companies have an adequate stock of LPG, they added.
Sources said the government is closely monitoring the evolving global energy situation and has taken steps to ensure that supply chains remain stable.
The widening conflict in the Middle East, which began on February 28 when the United States and Israel carried out strikes on Iran, followed by retaliatory attacks from Tehran, has disrupted energy flows through the Strait of Hormuz.
The narrow shipping corridor is a crucial artery for India’s energy supplies, with about 40-50 per cent of the country’s crude oil imports and nearly 85-90 per cent of its LPG shipments from Gulf nations passing through the route.
Sources said that while there is enough crude oil available from alternative sources, such as Russia, replacing any loss of LPG supplies is more time-consuming, as other alternative sources are largely located in the United States and Canada.
To ensure uninterrupted supplies, the government has ordered refineries to maximise LPG production and not use any of its streams for making petrochemicals.
On petrol and diesel, the situation is “very comfortable”, one of the sources said.
“Every petrol pump in the country is functioning, every piped natural gas (to household kitchens) is operational, every CNG station is open,” he said. “There is no cause for panic.”
For India, which imports 88 per cent of its requirement of crude oil, which is turned into fuels like petrol and diesel at refineries, higher global prices translate into a larger import bill and potential inflationary pressures.
However, retail fuel prices are not expected to be raised immediately, as the government continues to follow a calibrated policy of allowing companies to build margins when international prices are low and cushioning consumers when rates rise, sources said.
Retail petrol and diesel prices have been on a freeze since April 2022, with fuel retailers like Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) absorbing losses when crude prices are high and making profits when rates are low.
This meant that when global fuel prices went up in response to elevated crude prices, prices were stable in India. And when softening of crude prices pushed down fuel rates globally, rates in India remained unchanged.
The government wants to continue to shield consumers, and the same policy will continue unless there is a huge spike in crude prices, they said.
India imports 88 per cent of its crude oil needs and roughly half of its natural gas requirement. These mostly come via the Strait of Hormuz.
As India scouts for more LPG and gas supplies, some recalibration in supplies to different sectors is being done.
Following the US and Israeli attacks on Iranian government, military and nuclear facilities, Iran warned shipping away from the strait, and insurers withdrew coverage, effectively halting tanker movements.
“They (oil companies) have enough cushion to sustain this kind of price spike,” a source with direct knowledge of the matter said.
“We have seen prices rise to USD 119 per barrel in June 2022 in the aftermath of Russia’s invasion of Ukraine. That year, they had nominal profits, but in FY24, they posted record Rs 81,000 crore profit.”
This year, the three companies have posted Rs 23,743 crore profit in the December quarter alone.
PTI