Oil marketing firms to pay refineries reduced rate for petrol, diesel, ATF to curb growing deficits: Report
The revised pricing, effective from March 16, is expected to most severely impact independent refiners including MRPL, CPCL, and HMEL
In a significant departure from standard fuel price deregulation, India's state-owned oil marketing firms will now pay refineries a reduced rate for petrol, diesel, jet fuel (ATF), and kerosene to curb growing deficits caused by an internal freeze on retail costs, PTI reported citing sources.
These oil marketing companies (OMCs) established new rates on March 26 for petroleum goods at discounts reaching ₹60 per litre below their import costs, according to two individuals with direct insight into the situation.
The revised pricing, effective from March 16, is expected to most severely impact independent refiners including MRPL, CPCL, and HMEL.
Global crude prices have surged from roughly $70 per barrel prior to the West Asia hostilities to above $100, yet domestic retail petrol and diesel rates in India have stayed static, forcing OMCs to bear the financial burden. With the geopolitical tension showing no sign of resolution, OMCs have opted to implement a discount on the refinery transfer price (RTP) — the internal valuation at which refining units sell fuel to distribution arms — to effectively pay these plants less than the import-parity value for fuels like diesel and petrol.
During the latter half of March, a reduction of ₹22,342 per kilolitre ( ₹22.34 per litre) was applied to diesel, lowering the RTP from ₹85,349 per kl down to ₹63,007 per kl. For the initial two weeks of April, the diesel discount was set at ₹60,239 per kl to drop the RTP from ₹146,243 per kl to ₹86,004 per kl, reported PTI.
Regarding ATF, the RTP was trimmed to ₹76,923 per kl from ₹127,486 per kl after accounting for a ₹50,564 per kl discount. The RTP for kerosene, following a ₹46,311 per kl deduction, was fixed at ₹77,534 per kl instead of ₹123,845 per kl, sources told PTI.
The discounted model prevents refiners from passing through entire crude cost increases via RTP, requiring them to shoulder part of the strain from high global energy prices. While integrated state firms like Indian Oil Corporation (IOC), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL) can balance losses between refining and sales, standalone refiners depending on market-linked RTP for income may experience a tighter margin crunch.
Companies like Mangalore Refinery (MRPL), Chennai Petroleum (CPCL), and HPCL-Mittal (HMEL) — which lack major retail networks and supply most output to the three OMCs — will likely be hit hardest. The policy could also affect private players like Nayara Energy and Reliance Industries if the RTP discount is extended to them, sources told PTI.
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