India’s oil marketing companies (OMCs) have started paying lower rates to refineries as they deal with losses caused by a freeze in petrol and diesel prices.
Global crude oil prices have risen sharply due to tensions in the Middle East, but fuel prices in India have not been increased. This has forced OMCs to sell fuel at lower prices than their actual cost, leading to financial losses.
To reduce this burden, OMCs have cut the price at which they buy fuel from refineries. This price, known as the refinery transfer price, has been lowered below international rates. As a result, refineries are now receiving less money for the fuel they produce.
While this move helps OMCs manage their losses, it shifts some of the financial pressure to the refineries. Companies that mainly focus on refining, and do not sell fuel directly to consumers, are likely to be affected the most.
On the other hand, large oil companies that both refine and sell fuel may be better able to handle the impact, as they have multiple sources of income.
If global oil prices remain high, the pressure on both OMCs and refineries could increase further. Companies may continue to adjust prices within the supply chain to manage losses.
For consumers, the price freeze offers relief at the pump. But for oil companies, it means sharing the financial strain across different parts of the business.