As crude heads south, state oil companies rake in fat margins

ET Intelligence Group: Car and bike-owners are saving big as autofuel prices head south in India. But the biggest gainers from the precipitate plunge in global crude oil rates are state-owned petrol and diesel retailers, whose marketing margins are hitting new highs.

The gross marketing margin on each litre of fuel sold — the difference between retail selling prices and refinery transfer price after deducting dealer commissions and taxes — touched a record Rs 6.07 for petrol and Rs 4.75 for diesel, respectively, on November 26. In comparison, the averages over the past one year were Rs 1.80 and Rs 2.18, according to data compiled by ET Intelligence Group from the government’s Petroleum Planning and Analysis Cell (PPAC).

A senior official at a state oil retailer said that the practice of ‘normalised marketing margins’ has returned in the wake of the global pricing slump. Record margins show that retailers benefited more.


The Indian crude oil basket dropped 31 per cent from the October 4 high of $85.1 per barrel, while retail petrol prices for the average consumer were slashed 12.4 per cent in the period.

The smart recovery in marketing margins is reflected in the stock prices of the state-owned oil retailers. They have rebounded from October 4, when marketing margins were cut by Rs 1 per litre.

The combined market capitalisation of the three oil marketing companies (OMC) stands at Rs 2.41 lakh crore, just 10 per cent lower than what it was before October 4. The stock of HPCL, which has the highest reliance on marketing margins for its profits, is trading at levels almost on a par to those before the cut.

Analysts had downgraded the stocks of state-owned OMCs after the unprecedented cut in marketing margins as the federal move was seen as an undue intervention into market determined pricing. Profits from the marketing divisions at state-owned OMCs account for about three-fifths of their total operating profits.