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Mar 14, 2017 10:34 AM IST | Source: CNBC-TV18

Indian markets saw sharp dip in oil demand in February and March: HPCL

Indian market saw a big fall in fuel demand in January and February, said MK Surana, Chairman and Managing Director, Hindustan Petroleum Corporation Limited (HPCL).

However, he added that the negative figures are slowly tapering off and demand for the month of March is almost comparable to last year figures.

When asked about the potential Rs 44,000 crore ONGC-HPCL merger deal, Surana declined to offer any comment.

Below is the verbatim transcript of MK Suran’s interview to Latha Venkatesh, Sonia Shenoy, and Anuj Singhal on CNBC-TV18.

Sonia: I wanted to start with asking you about the fuel demand because we have seen a big fall in the month of February, almost to the tune of 3 percent on Indian oil demand itself. What could be the reason for this fall and what is your outlook going ahead?

A: Yes, that is correct, in February and January there was a bit of fall in the fuel demand in the Indian market. However, if you see, the negative figures have been slowly tapering. In March so far what we have seen, is the High Speed Diesel (HSD) demand has almost leveled to last year, and Motor Spirit (MS) is just picking it up; in the February month we are seeing increased demand and HSD just levelling it in March. So, that is correct, it has been negative, but negative figure is slowly tapering off. So, by the end of March, we see that HSD should about level to the last year and MS should be around 7 percent or so compared to last year.

Latha: Do you think that oil marketing companies (OMCs) now should have second thoughts on whether you can raise prices, of course at the moment global crude prices are falling, so, perhaps you may not necessarily see that pressure from crude product prices, but if they were to rise, do you think you will have the elbow room to raise prices here going forward?

A: Actually the prices are dependent, as I have been mentioning earlier also, depending on the crude prices and the Crack, and with lower crude prices the pressure will definitely be lesser. However, we do monitor these prices on day-to-day basis and then accordingly we adjust it with international pricing because ultimately it is derived from the international prices. However, the Cracks are still firm as far the refinery state is concerned, so, I think that we can watch the situation and accordingly take decision as required.

Anuj: If you could tell us, because the last two fortnights, there has been no revision, either on the upward side or the downward side, on both petrol and diesel, what is the current marketing margin right now on petrol and diesel and today we have I suppose the fortnightly review, should we expect any kind of move?

A: As I mentioned to you, we do analyse these results, analyse the market prices, and accordingly we do adjust. So, we will see as it comes.

Anuj: What is the current marketing margin?

A: It will be around Rs 1,500 a kiloliter (kl).

Anuj: Which is lower than what you have normally seen pre-election, say about till two months back, it would have been Rs 2-3 per liter?

A: No, it doesn’t go to that level. We keep on adjusting, so, it will not be that.

Latha: Will you be accommodating for lower margins considering that there is demand resistance at higher levels, will you only be looking at the Cracks and the crude price, or will you now also have to take cognizance of demand in elasticity?

A: No, we need to watch out all the three, but the Indian market, the demand elasticity is not been that high for very marginal changes. So, only if there is a big sharp fall then only the big difference is there. However, we will see as it comes depending on how the crude prices settles in, and how the Cracks move, and the demand because as I mentioned to you, the demand is a function of something else and the crude and Crack prices are something different.

Sonia: The other big issue that everyone is discussing is a possibility of the big merger, the ONGC-HPCL merger. Has the government moved forward on that front and have you been informed anything about the same?

A: So far we have not started any discussions on this. As and when we have got some potential discussions, we will let you know.

Sonia: Has there any timeline been defined on when the discussions could start?

A: No.

Latha: Has your rank and file and you proactively approached the government as to the problems in terms of integration of companies, ranks, impact on worker morale?

A: No, so far we have not discussed anything as such. So, if discussions, as and when it takes place, we will let you know.

Latha: Given a choice, what would according to you be a perfect fit?

A: Right now it will be incorrect for me to comment on what is a perfect fit or not, but once we have some discussion and we make up our mind, then it will be correct to discuss. It is too premature to discuss any of this.

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