End consumers should get fuel at most reasonable prices: HPCL’s MK Surana

HPCL

The escalating Russia-Ukraine crisis pushed crude oil close to $100 a barrel on February 22. Brent crude, the global benchmark, was up $3.48, or 3.7 percent, at $98.87 at around 2.30 pm, having earlier reached $99.38, the highest since September 2014, Reuters reported.

“There are three factors affecting the crude prices. One is the Russia-Ukraine crisis. The second is a contrarian view coming over Iran-US discussions. The third is the constant inability of OPEC to ramp-up production up to the need. So, there is a shortage of 900,000 barrels per day,” HPCL chairman and managing director MK Surana told CNBC-TV18 in an interview.

Also read: Russia-Ukraine Conflict | JPMorgan's Jahangir Aziz on potential sanctions by Russia, US dollar and oil

Talking about the recent hike in oil prices, Surana said OPEC plus countries were not able to ramp up supplies and there was a shortage of around 900,000 barrels.

The domestic demand for petrol was reaching the pre-pandemic level and that of diesel, too, would go up with the international travel likely to open from mid-March.

“With the possibility of international travel starting and Omicron fears almost over, prices are moving up,” he said.

Also read: Crude oil at $100: What does it mean for India

Talking about the recent hike in oil prices, Surana said OPEC plus countries were not able to ramp up supplies and there was a shortage of around 900,000 barrels.

The domestic demand for petrol was reaching the pre-pandemic level and that of diesel, too, would go up with the international travel likely to open from mid-March.

“With the possibility of international travel starting and Omicron fears almost over, prices are moving up,” he said.

On the outlook for the marketing segment in FY23 with the current margins in the negative, he said “Petrol is up. With the third-wave fears gone, diesel demand should also pick up.”

Asked if oil prices would climb up after March 10 once elections were completed in five states, Surana said the high rate of taxation, the high commodity prices and the exchange rate determined the domestic rates. Domestic prices would have to align with international rates, he said.

On prices remaining unchanged for the past three months, he said, “Crude prices continue to be high because tax and exchange rates are all up. If they continue to be high, there is no choice but to align it to the international prices.

“We are trying to ensure that we are able to supply the fuel to the end consumers at the most reasonable prices at the same time keep it aligned to international markets.”

Also read:  What does the Ukraine-Russia crisis mean for Indian trade?

‘Balancing act’

To a question whether an excise duty cut was needed to cool the prices, Surana said oil-marketing firms had no control over government policies.

"Tax is the prerogative of the government… There is a sensitivity of product prices in the market for people. It cannot go up like this. There should be a balance between taxation and international commodity price,” he said.

“As far as taxation is concerned, that is a call that the government has to take. Hope the government thinks about regulating tax to balance prices,” Surana said.

Also read: Russia–Ukraine crisis sucks up Rs 9.1 lakh crore of investor wealth since February 16

On HPCL’s rising debt, which was around Rs 40,000 crore as of FY21 and was expected to climb to Rs 64,000 crore on account of expansion, Surana said the debt had come down since they were not funding any expansion plans.

"Debt has been managed quite well as the company also made profits. We are comfortable now. Will study the picture taking into consideration serviceability. Major projects are getting completed now,” he said.

Also read: Explained | Why daily essentials have become dearer and when can we expect inflation to wane

To a query on the Vizag refinery expansion and the Mumbai project, the CMD said HPCL was “expecting a substantial jump in production due to bottom upgradation of Vizag refinery. Mumbai refinery project is completed and operating in full capacity”.