InvestorQ : How much is the government planning to compensate the oil marketing companies like HPCL, BPCL and IOCL for the marketing losses?
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How much is the government planning to compensate the oil marketing companies like HPCL, BPCL and IOCL for the marketing losses?

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Deepa Salunkhe answered.
3 weeks ago
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According to early estimates, the government will compensate OMCs to the tune of Rs20,000 crore for the losses caused by negative marketing margins. The big beneficiaries will be HPCL, BPCL and IOCL as they supply over 90% of India’s petroleum needs. In the June 2022 quarter, these 3 companies suffered a combined loss of over Rs22,000 crore due to selling petrol and diesel below the landed cost of crude. This will ease the pain of the oil marketing companies. This is also likely to raise the oil subsidy bill substantially from the budgetary allocation of Rs5,800. The subsidy was necessitated to keep inflation in control.

Oil prices doubled between October and February due to the Russia Ukraine war. However, OMCs hardly raised petrol and diesel prices. Even in the case of liquefied petroleum gas (LPG); which is largely used as cooking fuel, half is imported. Since 2020, Saudi Arabia has raised prices of LPG by 303% while retail prices are up just 28%. If the government continues with free pricing of petrol and diesel, it would result in a spike in inflation. Free pricing is a great idea but becomes redundant after a point when people seek protection at all costs.

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