State elections: Govt may cut petrol, diesel price by Rs 3-5 a litre around Diwali

New Delhi, Sep 6 (IANS): Following the recent cut in domestic LPG prices, the Central government may cut petrol, diesel price by Rs 3-5 a litre around Diwali given that key state elections start from November-December, JM Financial Institutional Securities said in a report.

Last week, the government cut the price of the domestic 14.2kg LPG cylinder by Rs 200/LPG cylinder for all 330 million consumers w.e.f. August 30.

This was to give relief to the common man from the recent surge in inflation.

OMCs marketing segment earnings could come under risk if: a) Brent crude price sustains above $85/bbl; and/or b) OMCs are forced to cut petrol/diesel price in the next few months, the report said.

The burden of this LPG price cut will be borne by the government; however, this may increase OMCs’ working capital given the usual lag in government compensation. Further, there is high expectation that government may also cut petrol/diesel price by rS 3-5/litre around Diwali given key state elections start from November-December. This cut should mostly happen via reduction in excise duty and/or VAT given OMCs are losing on the auto-fuel marketing business at the current high crude price, the report said.

However, we cannot rule out a scenario whereby the government may nudge OMCs to cut petrol/diesel prices as their balance sheets have largely got repaired due to likely strong profits in 1HFY24, the report added.

Sharp rise in Brent price to $90/bbl, driven by OPEC+ supply cuts, and surge in diesel cracks has led to OMCs’ blended spot auto-fuel gross marketing margin (GMM) declining to negative Rs 0.1/ltr vs. +INR 8.8/ltr in 1QFY24 and vs. historical GMM of +INR 3.5/ltr.

Our calculation suggest OMCs break-even Brent price (to earn historical GMM) is significantly lower at ~$80/bbl. Weak marketing margin is being partly offset by jump in GRM aided by strong diesel cracks; however, rise in Chinese oil product export quota and narrowing of Russian crude discount is likely to cap GRMs. OMCs’ 2QFY24E EBITDA is likely to decline to Rs 345 billion vs. Rs 483 billion in 1QFY24 but it is still higher vs. normalised quarterly EBITDA of INR 160 billion; HPCL will see the sharpest decline given its leverage to the marketing business, the report said.






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Comment on this article


    Wed, Sep 06 2023

    Election stunts and nothing else However Modi will rule India again with absolute majority

    DisAgree [22] Agree [6] Reply Report Abuse

  • Abdul, Vidyanagar, Kasaragod.

    Wed, Sep 06 2023

    Election gimmicks. Many more to come. Keep watching..

    DisAgree [3] Agree [19] Reply Report Abuse


    Thu, Sep 07 2023

    How much in kasarkod for Petrol

    DisAgree [4] Agree [1] Reply Report Abuse

  • Roland, Mangalore

    Wed, Sep 06 2023

    It’s predictable the moves of this government. They will reduce 3-5 now and then between January to March there will be more reduction in prices , even if the oil prices globally trades above USD 100+. If there’s injustice being done - the person who does injustice and the people who SUPPORT injustice will not go unpunished. Only time will tell.

    DisAgree [2] Agree [29] Reply Report Abuse

  • David Pais, Mangalore

    Wed, Sep 06 2023

    ಎಂಕುಲ್ನ ಕಿಸೆ ಖಾಲಿ ಮಲ್ತದ್, ಪಾಕೆಟ್ದ ಕಾಸ್ ಪೀಂಕಾದ್ ಆಯಿ ಬೊಕ್ಕ, ಕಡ್ಲೆ ತಿನ್ಯಾರ ಕೊರ್ಪೆರ್. ಎಂಕ್ ಮಾತ್ರ 15ಲಕ್ಷ ಬೋಡ್.

    DisAgree [8] Agree [28] Reply Report Abuse

  • real kujuma, kodial

    Wed, Sep 06 2023

    drama master chaiwala knows only this technique...but now the public of India very well know what changu and mangu are doing in Delhi....just wait till next LS elections...public will teach a lesson

    DisAgree [19] Agree [52] Reply Report Abuse

  • Sangram Sangam, KUNDAPUR

    Wed, Sep 06 2023

    You can feel free to advice CM to same drama to reduce state tax in karnataka

    DisAgree [24] Agree [8] Reply Report Abuse

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