Government may consider Rs 75,000-crore relief package for loss-hit OMCs

The Centre may propose a financial relief package for state-run oil marketing firms (OMCs), which lost around Rs 75,000 crore on the sale of diesel, petrol and LPG during the April-June quarter amid the West Asia crisis.

The proposed package seeks to make up for losses suffered by public-sector OMCs as a result of absorbing increased fuel costs without completely passing the burden on to customers, according to sources familiar with the situation.

The three state-run OMCs collectively suffered losses of Rs 74,781 crore during the April-June quarter, according to a statement made earlier this month by Petroleum and Natural Gas Minister Hardeep Singh Puri. Selling petrol, diesel and local LPG below cost in the face of rising global crude oil costs and geopolitical unrest was the main cause of the losses.

The sources added that the Ministry of Petroleum and Natural Gas is now reviewing the support package and that discussions regarding it are still in their early stages. There is yet no final conclusion. Before the plan is presented to the Cabinet for consideration, it must be approved by the finance ministry.

If approved, the proposal would assist offset losses during the quarter by giving state-owned fuel retailers financial relief. However, in order to compensate OMCs for selling LPG below cost, the government allocated Rs 22,000 crore in 2022 and an additional Rs 30,000 crore last year to them, according to the report.

However, according to sources, the government has been hesitant to make up for losses resulting from the sale of petrol and diesel, because doing so may undermine the idea of fuel price deregulation, and perhaps incite similar requests from private fuel sellers.

An important part of India’s fuel distribution network is played by the three state-run OMCs, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd. (BPCL), and Hindustan Petroleum Corporation Ltd. (HPCL).