Soaring crude prices a credit negative for PSU OMCs: ICRA

New Delhi, March 5 : The PSU oil marketing companies (OMCs) may go slow in automatic pass through of rise in international crude oil prices to the consumers due to the already high cost of transportation fuel such as petrol and diesel, ratings agency ICRA.
According to the ratings agency, the marketing margins of OMCs have been higher than the past long-term averages, presumably to bolster profits in a scenario of weak demand and subdued GRMs.
“Faced with a global over-supply amid weak demand owing to the Covid-19 pandemic, the crack spreads of MS, diesel and ATF crashed to historic lows leading to subdued GRMs globally,” Prashant Vasisht, Vice-President, Corporate Ratings, ICRA was quoted as saying in a statement.
“Nonetheless, marketing margins may witness pressure in the near term, if they pause fuel price changes as per the pricing formula.” Lately, prices of petrol have crossed the psychological Rs 100 per litre mark in some cities leading to increasing public outcry against the high prices and the inflationary impact of the auto fuels.
While some states such as Assam, Tripura have reduced VAT rates, the Centre has not yet reduced the excise duty rates on the auto fuels owing to its tight fiscal position post the Covid pandemic.