Stress remains
But all this just means the excise adjustment has only reduced OMCs’ stress, not eliminated it. According to a report by JM Financial Institutional Securities, “at spot Brent of around $111/bbl, OMCs auto-fuel integrated gross margin is still ~ ₹15/litre below historical level (at negative ₹2.5/litre versus historical average of positive ₹12.5/litre); this is likely to result in decrease in OMCs book value by 3.4% to 7% per month.” Similarly, Emkay Global Financial Services’ estimates suggested OMCs’ under-recoveries may have declined from ₹29-45 a litre to ₹17-28 a litre, but remain far from sustainable if crude stays elevated.
