A sustained decline in global crude oil prices could create room for a reduction in retail petrol and diesel prices over the coming months, Union Petroleum and Natural Gas Minister Hardeep Singh Puri said on Wednesday, while cautioning that any decision would depend on whether the current trend in international markets continues.
Speaking about the outlook for domestic fuel prices, Puri explained that the petrol and diesel currently being sold across the country are produced from crude oil that was purchased several weeks or months ago, when international crude prices were significantly higher than prevailing levels. Consequently, the recent fall in global crude prices has not yet been fully reflected in retail fuel prices.
The minister said that if lower international crude prices are sustained for the next two to three months, oil marketing companies would have greater flexibility to consider reducing petrol and diesel prices. "If lower crude prices continue for the next two to three months, the window for a retail price cut will open up," Puri said, indicating that sustained stability in global energy markets would be a key factor in any decision to revise fuel prices downwards.
He further noted that retail fuel pricing is influenced by multiple factors, including the cost at which crude oil is procured, refining expenses, transportation costs, taxes and the overall financial health of oil marketing companies. As a result, any changes in international crude prices take time to be reflected in prices at petrol pumps.
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Puri also drew attention to the financial burden being borne by state-owned oil marketing companies (OMCs), saying they continue to face significant under-recoveries despite the recent moderation in crude oil prices. He pointed out that public sector fuel retailers have absorbed substantial losses, particularly on the sale of domestic liquefied petroleum gas (LPG), while maintaining supplies to consumers.
According to the minister, the cumulative under-recoveries incurred by state-run OMCs between January and June, including losses arising from domestic LPG sales, amounted to nearly Rs 2.10 lakh crore. He said these financial pressures remain an important consideration while evaluating any changes in retail fuel pricing.
The minister's remarks come amid growing expectations that softer global crude oil prices could eventually translate into relief for consumers through lower petrol and diesel prices. However, he emphasised that any reduction in retail fuel rates would depend on the continued stability of lower international crude prices as well as the financial position and recovery requirements of the oil marketing companies.
Industry observers have also noted that while international crude prices have eased in recent weeks, domestic fuel price revisions typically occur with a lag, as refiners and fuel retailers first exhaust inventories produced from previously purchased higher-cost crude before passing on the benefits of lower input costs to consumers.
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