Fitch Ratings expects India’s petroleum product demand to stay moderately strong in the fourth quarter of the financial year ending March 2022 (2HFY22), as modest Covid-19 pandemic restrictions boost economic activity. However, recovery expectations remain subject to further restrictions due to the risk of a resurgence of Covid-19 cases in India with the emergence of new variants, even as the country makes progress in its vaccination plan. We expect the economic recovery to support higher throughput at Indian oil marketing companies – Hindustan Petroleum Corporation Limited, Indian Oil Corporation Ltd and Bharat Petroleum Corporation Limited – and at refineries, such as, HPCL-Mittal Energy Limited.

We expect a further improvement in the core gross refining margin in 2HFY22, as gasoline and diesel spreads continue to strengthen amid the economic recovery. The 1HFY22 reported margins of BPCL, IOC and HPCL improved to USD5.1/barrel, USD6.6/barrel and USD2.9/barrel, respectively, on account of rebounding demand, wider gasoline spreads and inventory gains. HPCL’s lower gross refining margin is due to a planned refinery shutdown.We expect the OMCs to generate steady marketing margins in 2HFY22, as they continue to pass on higher crude oil prices to consumers. Government cuts to gasoline and gasoil excise duties, as well as to value added tax in some states, should cushion retail fuel-price affordability and the OMCs’ marketing margins.
Source: Fitch Ratings