India’s state-owned fuel giants – Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) – reported a combined net profit of a staggering Rs 81,000 crore in FY24. This is a significant jump compared to their pre-crisis years’ earnings.
The record profits can be attributed to a confluence of factors. Firstly, international oil prices skyrocketed in the first half of FY24. However, the companies did not pass on this increase to consumers by keeping prices steady for the past two years. This strategy resulted in losses for the companies in the first half of FY23 when international oil prices were high.
IOC, BPCL, HPCL post Rs 81,000 cr record profit in FY24
Secondly, the government provided a Rs 30,000 crore support package to these companies in the 2023-24 budget to aid their transition to cleaner energy sources. However, this support, which was supposed to be delivered through a rights issue, has yet to materialize.
The record profits come despite the companies facing criticism for not revising prices regularly in line with international fluctuations. The retailers argue that extreme price volatility and the need to recoup losses incurred during the previous year when they absorbed high international oil prices necessitate the current pricing strategy.
While IOC and BPCL managed to turn a profit in FY23 due to softening international prices in the latter half and government support, HPCL grappled with losses. However, all three companies witnessed a dramatic turnaround in FY24, particularly in the first two quarters, when international oil prices nearly halved compared to the previous year.
This situation has created a conundrum. The oil companies are enjoying substantial profits, but consumers are not benefiting from the decrease in global oil prices. The government is under pressure to ensure a fairer balance between the interests of the companies and the needs of the public.
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