State-owned fuel retailers Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd reported bumper profit totalling over Rs 69,000 crore in the first nine months of the current fiscal which far exceeded their annual earning in pre-oil crisis years.

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The combined net profit of IOC, BPCL and HPCL in April-December FY24 was better than their annual earning of Rs 39,356 crore in pre-oil crisis year, regulatory filings by them showed. The retailers have resisted calls to revert to daily price revision and pass on softening in rates to consumers on grounds that prices continue to be extremely volatile - rising on one day and falling on the other - and that their past losses have not been fully recouped.

The three companies, which control roughly 90 per cent of India's fuel market, 'voluntarily' have not changed petrol, diesel and cooking gas (LPG) prices for almost two years now, resulting in losses when input cost was higher and profits when raw material prices were lower.

They posted a combined net loss of Rs 21,201.18 crore during April-September 2022 despite accounting for Rs 22,000 crore announced but not paid LPG subsidy for the previous two years.
Subsequent softening of international prices and government giving out LPG subsidy helped IOC and BPCL post annualised profit for 2022-23 (April 2022 to March 2023 ) but HPCL was in the red.

This fiscal year, things have changed dramatically. The three firms posted record earnings in the first two quarters (April-June and July-September) when international oil prices - against which domestic rates are benchmarked - almost halved to USD 72 a barrel from a year ago.

International prices rose again in the subsequent quarter to USD 90, leading to moderation of their earnings. But, on a year as a whole they had rich profits. IOC in the first nine months of the current fiscal (April-December 2023) posted a standalone net profit of Rs 34,781.15 crore, according to the company's regulatory filing.

This compared with Rs 8,241.82 crore annual net profit in 2022-23. While the company could argue that FY23 was impacted by the oil crisis, the 9-month earnings are higher than even the pre-crisis years - Rs 24,184 crore net profit in 2021-22 and Rs 21,836 crore in 2020-21.

BPCL posted a net profit of Rs 22,449.32 crore in the 9-month period of current fiscal as compared to a loss of Rs 4,607.64 crore in the same period last year. This profit was higher than Rs 1,870.10 crore earning in 2022-23 and Rs 8,788.73 crore in FY22. HPCL's 9-month profit of Rs 11,851.08 crore compared with a Rs 8,974.03 crore loss in FY23 and a profit of Rs 6,382.63 crore in 2021-22.

The fuel price freeze that began on April 6, 2022, had a loss as high as Rs 17.4 a litre on petrol and Rs 27.7 per litre on diesel for the week ended June 24, 2022. However, subsequent softening led to losses being eliminated. The three firms had a margin of Rs 11 a litre on petrol and Rs 6 on diesel last month.

According to Girishkumar Kadam, senior vice president and group head, of corporate ratings, Icra Ltd, the three oil marketing companies reported healthy operating margins in H1 FY24, recouping the losses incurred during FY2023. "The aggregate operating profitability of the OMCs was Rs 90,000 crore in H1 FY2024 against a loss of Rs 14,600 crore in H1 FY2023."

International oil prices have been turbulent in the last couple of years. It dipped into the negative zone at the start of the pandemic in 2020 and swung wildly in 2022 - climbing to a 14-year high of nearly USD 140 per barrel in March 2022 after Russia invaded Ukraine, before sliding on weaker demand from top importer China and worries of an economic contraction. But for a nation that is 85 per cent dependent on imports, the spike meant adding to already elevated levels of inflation and derailing the economic recovery from the pandemic.

So the three fuel retailers froze petrol and diesel prices for the longest duration in the last two decades. They stopped daily price revision in early November 2021 when rates across the country hit an all-time high, prompting the government to roll back a part of the excise duty hike it had effected during the pandemic to take advantage of low oil prices.

The freeze continued into 2022 but the war-led spike in international oil prices prompted a Rs 10 a litre hike in petrol and diesel prices from mid-March 2022 before another round of excise duty cut rolled back all of the Rs 13 a litre and Rs 16 a litre increase in taxes on petrol and diesel done during the pandemic. That followed the current price freeze which began on April 6, 2022 and still continues.