Shares of India’s state-run oil marketing companies (OMCs) Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd, pared yesterday’s losses to recover in early trade on Tuesday, May 19, after the government hiked domestic petrol and diesel prices for the second time in a week. Global crude oil prices also declined after US President Donald Trump called off a planned military strike on Iran, raising hopes that renewed negotiations could ease tensions in the Middle East.
Shares of IOCL, BPCL, and HPCL opened nearly 2% higher each and trade in green amid a broader positive sentiment across the domestic frontline indices. On the NSE, shares of HPCL last traded 2.15% higher at Rs 366.50, IOCL traded 2.24% higher at Rs 134.76, and BPCL shares were last down 2.67% lower at Rs 288.30 apiece on the NSE. After the opening bell, NSE benchmark Nifty 50 rose upto to 0.4% to 23,734 while the 30-share BSE Sensex gained nearly 0.5% or 340 points to 75,656.
OMCs Hike Fuel Prices
Days after announcing a standard Rs 3 per litre price hikes in diesel and petrol, Indian oil marketing companies have introduced another hike of 90 paise on Tuesday morning, taking the total price hike in fuel prices to Rs 3.9 per litre. The hike in retail prices come as OMCs have been bearing the brunt of elevated crude oil prices over supply disruptions due to the Strait of Hormuz bloackade that has destabilised global energy markets. Earlier this month, Petroleum Minister Hardeep Singh Puri had announced that Indian OMCs are incurring lossesof up to Rs 1 – 1.2 lakh crore in Q1FY27 amid the Middle East conflict.
This translates to a daily cumulative loss of Rs 1,100 – 1,300 crore per day that these OMCs are absorbing, making long-term sustenance effectively impossible. The fuel price hikes are seen as a way to cushion the blow, as HPCL, BPCL and IOCL look to lower their losses by passing on some of the cost to the end consumer. The latest price hike of 90 paise across petrol and diesel will add to the existing Rs 3 per litre that was already announced four days ago, taking the total hike to Rs 3.9 per litre.
How will fuel price hike benefit OMCs?
According to brokerages, every half a rupee per litre increase in fuel marketing margins is estimated to lift Ebitda by 7% for IOCL, 8% for BPCL and 11% for HPCL. The total fuel consumed in India now stands at 463 million litres per day, with OMCs having a 90% market share in the space. This means a total of 417 million litres per day of petrol/diesel is consumed in pumps owned by HPCL, BPCL and IOCL. Taking that into account, a 90 paise hike would help these OMCs recoup Rs 38 crore per day. If we combine the two hikes, these companies will be able to recoup Rs 163 crore per day, which is roughly 12.5-14.8% of the estimated daily loss they are bearing.
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