Petrol, diesel price hike impact: BPCL, IOC, HPCL share reaction likely |OMC stocks

Shares of Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and Indian Oil Corporation Ltd (IOC), the three oil marketing companies (OMCs), are likely to react to the government's move to hike petrol and diesel prices by Rs 3 each. The move is seen easing some pressure on OMCs, which had been witnessing huge under-recoveries.

The hike in petrol and diesel prices, however, is less than a Rs 5 per litre increase that some media reports anticipated earlier. Analysts estimated a Rs 15-20 per litre increase is needed for OMCs to stop incurring losses. Petrol and diesel have a 4.8 per cent weighting in India’s CPI basket and a 5 per cent increase could add around 25-30 basis points to headline inflation, Nomura had suggested earlier. 

In Delhi, petrol prices jumped to Rs 97.77 per litre from Rs 94.77 earlier. Diesel rose from Rs 87.67 to Rs 90.67. Across other metros, the increases ranged between Rs 2.83 and Rs 3.29 per litre, with petrol now priced at Rs 108.74 in Kolkata, Rs 106.68 in Mumbai and Rs 103.67 in Chennai. In the case of diesel, prices in Kolkata now stands at Rs 95.13 per litre, Mumbai at Rs 93.14 and Chennai at Rs 95.25.

Emkay Global pegged under-recoveries at Rs 17-18 per litre at current crude levels, even after the excise cuts of Rs 10 per litre effected on March 27, leading to quarterly OMC losses of Rs 57,000-58,000 crore. 

"We expect hikes of Rs 10 per litre to cover 50 per cent of under-recoveries, either in one shot or via creeping hikes over 2-3 weeks. This is likely to deliver an inflation and consumption shock, with a more pronounced impact on mass segments," Emkay said just before the fresh fuel rate hike. 

OMCs in India were absorbing at least Rs 30,000 crore every month due to massive under-recoveries on petrol, diesel, and LPG, Sujata Sharma, Joint Secretary, Ministry of Petroleum and Natural Gas (MoPNG), recently suggested during an Inter-Ministerial briefing in New Delhi on the West Asia crisis. "OMCs are buying Crude, LPG, and Natural Gas at very high levels," Sharma stated, noting that despite the international spike, the government has ensured "uninterrupted supply to domestic households" and "no rationing of petrol or diesel."