Public sector petroleum marketing companies (OMCs) are considering paying lower prices for petrol and diesel to refineries to reduce the losses they are incurring due to not increasing the retail prices of fuel. This step may have a negative impact on single refinery companies like MRPL, CPCL and HML. Before the West Asia crisis, international crude oil prices were around $70 per barrel, which have now crossed $100. However, retail prices of petrol and diesel in India remain stable, due to which petroleum marketing companies are having to bear the burden of this increase.
This is the plan being made
Sources having knowledge of the matter said that OMC is now considering the option of banning the Refinery Transfer Price (RTP) or fixing a discount on it. RTP is the internal price at which refineries sell fuel to their marketing segments. The purpose of this step is to pay the refineries less than the import parity cost of petrol and diesel. If global oil prices remain high, this proposed move will prevent refineries from passing on the entire burden of increased crude oil costs through RTP and will have to bear a part of the impact.
This is how the loss will be compensated
According to sources, integrated companies like Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) can compensate for this loss between their refining and marketing operations. On the other hand, single refineries like Mangalore Refinery and Petrochemicals Limited (MRPL), Chennai Petroleum Corporation Limited (CPCL) and HPCL-Mittal Energy Limited (HMEL) have negligible presence in the retail market and sell most of their production to these three OMCs. In such a situation, their margins will be affected the most.
Reliance will also be affected
Sources also said that if the ban or relaxation on RTP is also implemented on private refineries, then refinery companies like Nayara Energy and Reliance Industries Limited will also be affected. Both these private companies sell a large part of their production to OMCs. The two private refineries sell a major part of their petrol and diesel production to oil marketing companies (OMCs), which own and operate 90 per cent of the country’s more than 1 lakh petrol pumps.