Saudi discount to only partially transmit in product prices: IOC chief

India is likely to gain $5-6 a barrel in oil import after Saudi Arabia offered a discount on its official selling price (OSP) for Asia. However, a substantial portion of this will be neutralised by the fall in rupee value and government taxes on petroleum products.

The crude oil impact on prices of petrol and diesel would be 40-50 per cent of the total price. The Indian crude oil basket fell to $34.52 a barrel after the fall in global prices, more than half the $71 it averaged in April 2019. The rupee’s value has, however, depreciated. A dollar is now Rs 73.95, from Rs 69.89 last year.

According to Sanjiv Singh, chairman of Indian Oil Corporation, each rupee depreciation results in Rs 2,500 crore of more outgo on crude oil import. ”It is immaterial if we convert (the Saudi discount) into the retail price but the cut in price could be 55-60 paise a litre.”

Singh said IOC would incur significant inventory loss with the price fall. “It will also affect our quarterly and yearly results. It is a concern because it impacts our balance sheet.” The impact cannot be neutralised in subsequent quarters, since it is coming in the financial year’s final quarter, ending March 2020.

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