Rising under-recoveries to hit OMC profit even as crude prices rise: Report

Thinner spreads and rising under-recoveries are expected to shave the operating profit margins of oil marketing companies (OMCs) by 1.5-1.7 per cent this fiscal, even as crude prices remain elevated and volatile, a report said.

According to the rating agency Crisil, operating margins had declined 1.6 per cent in fiscal 2019.

“We also foresee net profit margins coming under pressure because of higher interest costs. OMCs have had to contract 22 per cent more short-term debt last fiscal because of inadequate payments from the government, and also to service under-recoveries of the recent past,” Crisil Research Senior Director Prasad Koparkar said.