After the government reduced excise duty on petrol and diesel prices last week, it came as a blow to the oil marketing companies (OMCs), which were trading at their 52-week lows on October 4.

According to Crisil Research, the OMCs may be looking at about Rs 3,500 crore blow to their operating profit in the second quarter.

“As things stand, average gross marketing margins of the OMCs on diesel and petrol have come off from about Rs 3 per litre in the closing quarter of fiscal 2018 to about Rs 2.60 per litre in the second quarter this fiscal due to the uptrend in crude prices. Given this, our calculations indicate that the Re 1 per litre blow will shave 100-130 basis points off the OMCs’ operating margins and a Rs 3,000-3,500 crore decline in operating profits this quarter,” Prasad Koparkar, senior director, Crisil Research said.

As per the announcement by the finance ministry, central excise duty on the two fuels has been slashed by Rs 1.50 per litre, while Re 1 per litre would have to be absorbed by the OMCs in their marketing margins. The total benefits to consumers will come around Rs 2.5 per litre on both petrol and diesel.

During the first quarter, operating profits of OMCs had increased significantly driven by higher marketing margins and pass through of higher crude oil prices, the report said.

However, currently with the marketing margins on a decline, OMCs could be looking at 15 percent dent in operating profits this quarter and a further 18 percent drop in the next quarter, assuming the government decides to extend the marketing margin hit.

In the early morning trade on Monday, shares of public sector oil marketing companies — BPCL, HPCL and IOC — surged by up to 4.06 percent after these companies revised petrol and diesel prices.

Fuel prices across major cities stepped back from record highs after the government last week intervened by reducing excise duty on petrol and diesel prices.

In Mumbai, petrol price was at Rs 87.05 a litre, while diesel declined to Rs 77.37 a litre. In New Delhi, petrol and diesel prices were at Rs 82.03 a litre and Rs 73.82 a litre, respectively.

First Published:Oct 8, 2018 2:05 PM IST