New Delhi: Fuel retailers have seen their margins on high-speed diesel (HSD) sales decline during the first half of August, according to a report by Icra.
The petroleum industry has been grappling with a complex mix of factors impacting its profitability. Indian oil marketing companies (OMCs) have been hit by rising international gasoline and gasoil prices, causing a squeeze on their marketing margins. While margins for motor spirit (MS) have remained positive, those for HSD turned negative in the initial part of August 2023.
The outlook is clouded by challenges such as weak global economic growth, inflationary pressures, a slower-than-anticipated Chinese economic recovery, and the commencement of new refining capacities.
In response to these challenges, the government on 14 August increased the special additional excise duty (SAED) on HSD to ₹5.5 per litre, up from Re 1 per litre, and on ATF to ₹2 per litre from nil. Notably, the duty on MS remained unchanged at nil. This adjustment in SAED was aimed at addressing the rising international prices and crack spreads of HSD and ATF.
The ICRA report said the reduction in marketing margins for HSD is likely to impact the operating margins of OMCs in the second quarter of FY 2024 compared to the first quarter of the same fiscal year. However, the higher SAED on HSD and ATF is expected to partially offset this impact, providing some relief to the profitability of OMCs dealing in these products.
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Updated: 31 Aug 2023, 03:30 PM IST
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