Softening crude to help OMCs cut losses

Softening of crude prices in the last couple of weeks will help government-owned oil marketing companies (OMCs) to cut down on the huge losses these companies have been incurring. Before the government hiked the petro product prices, the aggregate under-recoveries of OMCs were estimated at Rs 2,45,000 crore for the current fiscal. The estimate came down to Rs 2,05,000 crore after the government increased petro prices by 11% in first week of June.

However, crude prices have come down from a peak of $147.27 a barrel last month to $ 113.62 per barrel on Wednesday. This will provide the oil companies an opportunity to reduce their losses. If the price of crude stays around the current level, aggregate under-recoveries of OMCs will come down to nearly Rs 1,70,000 crore.