According to a report, India Will Pay State-Run Fuel Retailers Hit by High Oil Prices of $2.5 Billion.
India could make a $2.5 billion offer to fuel merchants affected by the price of oil.
According to persons who know the situation, India intends to pay around 200 billion ($2.5 billion) to state-run fuel merchants, such as Indian Oil Corp., to partially make up for losses and maintain control over cooking gas pricing.
According to the sources, the finance ministry is only consenting to a 200 billion rupee cash settlement, which asked to remain anonymous because the talks are secret. The oil ministry has requested compensation of 280 billion rupees. The people stated that although the negotiations are well along, no decision has yet been made.
The three biggest state-run retailers, which supply more than 90 percent of India’s petroleum fuels, have suffered the worst quarterly losses in years by absorbing record international crude prices.
While the assistance would lessen their suffering, it would put more burden on the government’s finances, which are already under pressure from fuel tax cuts and a more significant fertilizer subsidy to combat escalating inflationary pressures.
State-run retailers’ stock prices increased, with Hindustan Petroleum Corp.’s shares rising 1.7%, Bharat Petroleum Corp.’s up 1.2%, and Indian Oil’s finishing 0.1% higher after sliding as much as 0.8% earlier in the session.
For the fiscal year that ends in March, the government allocated 58 billion rupees for oil subsidies and 1.05 trillion rupees for fertilizer subsidies.
These oil-refining and fuel-retailing businesses benchmarked the fuels they produced to market rates even though they utilize more than 85% of imported oil.
Those increased as a worldwide demand rebound coincided with decreased US petroleum production capacity and reduced Russian exports.
While private firms like Reliance Industries Ltd. have the freedom to take advantage of more robust fuel export markets, state oil corporations are required to purchase crude at international rates and sell it domestically in a price-sensitive market.
About half of India’s liquefied petroleum gas, often used as cooking fuel, is imported.
Hardeep Singh Puri, India’s oil minister, stated on September 9 that the retail price in Delhi has climbed by 28%, while the Saudi contract price, the import benchmark for LPG in India, had increased by 303% in the last two years.
To slow the inflation rate, the businesses have also held down the price of gasoline and diesel at the pump since early April.
According to Bharat Petroleum Chairman Arun Kumar Singh, the oil firms would need some type of intervention through price rises or government compensation to offset prolonged losses.