India may have to eventually reckon with how long its major state-owned fuel retailers could sustain losses amid soaring international prices and artificially lowered prices at home, according to Oil Minister Hardeep Singh Puri.
India’s oil marketing companies (OMCs) are selling gasoline and diesel below market prices, as the world’s third-largest crude importer looks to shield consumers in the world’s most populous country from soaring prices at the pump.
Eventually, the authorities may have to assess how long these fuel retailers can operate at such massive losses, the oil minister said at an industry event on Tuesday, as carried by Reuters.
India’s Prime Minister Narendra Modi this weekend urged Indians to work from home, travel less, and conserve fuel.
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In a weekend post on X, Puri reiterated the call and wrote that “India is among very few countries which have not raised energy prices and has maintained steady supplies to the citizens even as we see crises unfold in many parts of the world.”
“Our energy sector is absorbing the brunt of the impact. OMCs are buying crude, gas and LPG at higher cost, but in order to protect consumers, they are selling final products at lower cost leading to massive mounting losses of up to ?1,000 crore per day. However, the OMCs have ensured uninterrupted energy imports and supply,” the oil minister said.
India has cut taxes on gasoline and diesel prices to protect consumers, but eventually retail fuel prices would rise if the supply shock from the Middle East persists, analysts say.
“I am assuming that sometime in Q2, rather sooner than later, they will have to hike retail fuel prices because neither the fiscal buffers nor (the) buffers with the OMCs (oil marketing companies) are enough to withstand a prolonged shock,” Dhiraj Nim, an economist at ANZ bank, told Reuters last week.
By Tsvetana Paraskova for Oilprice.com
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