Crude back at 2012 levels, rupee lifts OMC costs by 86%

The problem is not just expensive crude. India pays for most of its oil imports in dollars, and the rupee's sharp depreciation has substantially increased the domestic cost of purchases. Weaker rupee pushes up India's crude oil import costs The Indian crude basket stood at $123.29 per barrel on October 23, compared with $123.95 on March 27, 2012. However, the rupee has weakened from Rs 50.91 per dollar to a recent Rs 95.1549, pushing the equivalent crude cost from around Rs 6,310 to Rs 11,732 per barrel.

According to Elara Capital, OMCs incurred an estimated diesel marketing loss of Rs 24 per litre during July-September, compared with a profit of Rs 5 a year earlier. Petrol margins turned negative at Rs 2 per litre, against a profit of Rs 9 previously. Separately, Icra estimated diesel under-recoveries at around Rs 20 per litre in October, compared with Rs 9 in late September. In Delhi, petrol currently costs Rs 102.12 per litre, against Rs 65.64 in March 2012, while diesel has risen from Rs 40.91 to Rs 95.20.

OMCs raised fuel prices by around Rs 7.50 per litre in May, but rates have remained unchanged since then. At the prevailing exchange rate, every $1-per-barrel increase in crude adds roughly 60 paise per litre to raw-material costs. Similarly, every Re 1 depreciation against the dollar increases costs by around 78 paise per litre at current crude prices. These are procurement-cost increases, not direct marketing losses.

According to Petroleum Planning and Analysis Cell (PPAC) data, crude imports cost $90.6 billion during April-September FY27, nearly $29 billion more than a year earlier, although volumes increased less than 1% to 122.7 million tonnes. The net oil and gas import bill rose 35% to $81.1 billion. To ease currency-market pressure, the Reserve Bank of India (RBI) opened a special dollar window from October 12 for Indian Oil Corporation, Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL).

The arrangement allows the companies to meet their dollar requirements through designated banks, reducing demand in the spot market. The strain is visible in quarterly earnings, although the results predate October's crude surge. BPCL's consolidated net profit declined 21.5% to Rs 4,863 crore during July-September, despite gross refining margins of $32.53 per barrel before special additional excise duty.

HPCL's consolidated profit fell 6% to Rs 3,625 crore, even as refining margins rose to $32.15 per barrel from $8.80 a year earlier. Its consolidated loss for April-September stood at Rs 8,639 crore, against a profit of Rs 7,970 crore a year earlier. The Centre has already reduced special additional excise duty on petrol and diesel by Rs 10 per litre to provide relief. However, excise collections declined nearly 23% to Rs 86,687 crore during April-August.

With crude prices elevated amid the West Asia conflict, stronger refining earnings are providing some relief, but persistent marketing losses and currency pressure continue to weigh on OMC profitability.