Begin typing your search above and press return to search.
Schools breeding hatred
access_time 14 Sep 2023 10:37 AM GMT
access_time 16 Aug 2023 5:46 AM GMT
May that spark not be extinguished
access_time 2 Dec 2023 8:55 AM GMT
A Constitution always in the making
access_time 27 Nov 2023 11:43 AM GMT
Debunking myth of Israel’s existence
access_time 23 Oct 2023 7:01 AM GMT
Homechevron_rightIndiachevron_rightGovt likely to cut...

Govt likely to cut petrol, diesel prices ahead of Diwali

Govt likely to cut petrol, diesel prices ahead of Diwali

New Delhi: The Central government is expected to cut petrol and diesel prices by Rs 3-5 per litre ahead of Diwali and key state elections in November-December, according to JM Financial Institutional Securities’s report.

The recent report came a week after the government cut the prices of domestic 14.2 kg LPG cylinders by Rs 200 per cylinder for all 330 million consumers providing relief from the recent surge in inflation.

As per the report, Oil Marketing Companies (OMC) marketing segment earnings could come under risk if crude price sustains above $85 per barrel or OMCs are forced to cut petrol and diesel prices in the next few months.

The burden of this LPG price cut will be borne by the government; however, this may increase OMCs’ working capital given the usual lag in government compensation.

The price cut should mostly happen via the reduction in excise duty and/or VAT given OMCs are losing on the auto-fuel marketing business at the current high crude price, the report said.

However, we cannot rule out a scenario whereby the government may nudge OMCs to cut petrol/diesel prices as their balance sheets have largely been repaired due to likely strong profits in the first half of FY24, the report added.

A sharp rise in Brent crude price to $90 per barrel, driven by OPEC+ supply cuts, and a surge in diesel cracks has led to OMCs’ blended spot auto-fuel gross marketing margin (GMM) declining to negative Rs 0.1 per litre vs. +Rs 8.8 per litre in Q1 of FY24 and vs. historical GMM of + Rs 3.5 per litre.

“Our calculation suggests OMC's break-even Brent price (to earn historical GMM) is significantly lower at nearly $80 per barrel. Weak marketing margin is being partly offset by a jump in GRM aided by strong diesel cracks; however, a rise in Chinese oil product export quota and narrowing of Russian crude discount is likely to cap GRMs,” the report said.

OMCs’ 2QFY24E EBITDA is likely to decline to Rs 345 billion vs. Rs 483 billion in 1QFY24 but it is still higher vs. normalised quarterly EBITDA of INR 160 billion; HPCL will see the sharpest decline given its leverage to the marketing business, it added.

With inputs from IANS

Show Full Article
TAGS:DiwaliPetrol diesel priceLPG priceprice cutIndia NewsBusiness News
Next Story