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The Indian refining industry comprises 22 refineries, (17 public sector, 3 private sector and 2 are JVs between PSU and private players). Domestic refining capacity has almost doubled in the last 10 years with almost 50% of expansion coming in the last 5 years. Currently, India has a refining capacity of ~215.1 mmtpa of which PSU (including JV) constitutes 135.1 mmtpa (63% capacity) and private sector constitutes the rest. Demand for petroleum products in the country is primarily driven by the transportation sector. India is expected to remain a net exporter of petroleum products due to huge refining capacity. Under-recoveries are the difference between the trade-parity cost of refined product paid by OMCs and their realised sale price. Under-recoveries have escalated sharply in recent years to Rs1,610bn in FY13 (Rs400bn in FY06), its highest ever, due to rise in Brent oil prices from an average of US$58/bbl in FY06 to an average of US$110/bbl in FY13. The mounting burden of under-recoveries has seriously affected the operational functioning and financial health of OMCs; shrinking their liquidity position and has significantly impaired corporate flexibility.

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Updates

    • Quarterly Update Jun-14

      GRM strengthened on higher middle distillate; government support continues to be OMC's lifeline....

    • Quarterly Update Mar-14

      Globally, GRMs remained low on weak gasoline cracks; in domestic industry - under-recoveries to come down with rupee strengthening....

    • Quarterly Update Dec-13

      Globally, GRMs remained low on lower demand; domestic industry on the path of reforms amid various uncertainties....

    • Quarterly Update Sep-13

      Fuel oil cracks supported GRMs; Forex fluctuation impacted profitability....

    • Quarterly Update Jun-13

      Softening crude coupled with deregulation fueling the growth however weak auto demand still remain a concern....

    • Quarterly Update Mar-13

      Deregulation spurs hope....

    • Quarterly Update Dec-12

      Weak auto sales impact demand, under-recoveries remain a concern....

Impact Analysis

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