State-owned fuel retailers Indian Oil Corp., Bharat Petroleum Corporation Ltd., and Hindustan Petroleum Corporation Ltd. have reported bumper profits totaling about Rs 81,000 crore in FY24. These profits far exceed their annual earnings in the years before the oil crisis.
According to regulatory filings, the combined standalone net profit of IOC, BPCL, and HPCL from April 2023 to March 2024 was better than their annual earnings of Rs 39,356 crore in the pre-oil crisis years. In fact, all three companies posted their highest ever standalone as well as consolidated net profit in FY24.
Reasons for Resisting Daily Price Revision
The retailers have resisted calls to revert to daily price revision and pass on the softening in rates to consumers. They argue that prices continue to be extremely volatile, rising on one day and falling on the other. Additionally, they need to recoup losses incurred in the year when they kept rates lower than cost.
Individual Company Performance in FY24
- Indian Oil Corp. (IOC): In 2023-24, IOC posted a standalone net profit of Rs 39,618.84 crore, compared to Rs 8,241.82 crore in 2022-23. While the company could argue that FY23 was impacted by the oil crisis, the FY24 earnings are higher than even the pre-crisis years.
- Bharat Petroleum Corporation Ltd. (BPCL): BPCL posted a net profit of Rs 26,673.50 crore in FY24, higher than Rs 1,870.10 crore in 2022-23 and Rs 8,788.73 crore in FY22.
- Hindustan Petroleum Corporation Ltd. (HPCL): HPCL’s profit of Rs 14,693.83 crore in 2023-24 is compared to a loss of Rs 8,974.03 crore in FY23 and a profit of Rs 6,382.63 crore in 2021-22.
Government Support and LPG Subsidy
The losses incurred by the fuel retailers in FY23 led to Finance Minister Nirmala Sitharaman announcing Rs 30,000 crore for IOC, BPCL, and HPCL to support their energy transition plans in her budget for 2023-24. However, this support was later halved to Rs 15,000 crore. The support, which was supposed to happen through equity infusion via a rights issue, has not been given yet.
The three companies have voluntarily refrained from changing petrol, diesel, and cooking gas prices for the past two years. Despite accounting for the announced but unpaid LPG subsidy of Rs 22,000 crore for the previous two years, they posted a combined net loss of Rs 21,201.18 crore during April-September 2022.
Subsequent softening of international prices and government subsidies helped IOC and BPCL post annualized profits for 2022-23, while HPCL remained in the red.
Impact of International Oil Prices
International oil prices have been turbulent in the last couple of years. They dipped into the negative zone at the start of the pandemic in 2020 and swung wildly in 2022. The spike in prices added to already elevated levels of inflation in a nation that is 85% dependent on imports, derailing the economic recovery from the pandemic.
To mitigate the impact of rising oil prices, the fuel retailers froze petrol and diesel prices for the longest duration in the last two decades. They stopped daily price revision in early November 2021 when rates across the country hit an all-time high. The freeze continued into 2022, but the spike in international oil prices prompted a hike in petrol and diesel prices from mid-March 2022.
Current Price Freeze
The current price freeze began on April 6, 2022, and continued until a reduction in mid-March 2024. Since then, there has been another freeze in rates.