Crude Reality

Since the Iran crisis erupted five months ago and sent tremors through global energy markets, India’s motorists have been spared the full force of the oil shock. Despite a hike, petrol pumps have generally continued to display familiar prices even as crude surged, because state-owned oil companies quietly absorbed the damage. However, with losses now piling up at Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), it appears that the bill, which had been...

min read

Since the Iran crisis erupted five months ago and sent tremors through global energy markets, India’s motorists have been spared the full force of the oil shock. Despite a hike, petrol pumps have generally continued to display familiar prices even as crude surged, because state-owned oil companies quietly absorbed the damage. However, with losses now piling up at Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), it appears that the bill, which had been deferred all this while, cannot be avoided. Unless global crude prices retreat sharply, Indian consumers may soon feel the full force of the unabating West Asian crisis. HPCL plunged into a consolidated loss of Rs. 12,265 crore in the June quarter, while BPCL reported a loss of Rs. 3,962 crore - the first quarterly loss for the latter in 15 quarters. The crisis has exposed that India’s fuel-price stability remains heavily dependent on the financial health of state-run oil companies. When global markets turn hostile, these companies are expected to sacrifice margins, protect consumers and absorb geopolitical shocks. This model becomes increasingly fragile when crises become prolonged. Crude oil prices briefly approached $125 a barrel during the height of the West Asia conflict, rising more than 50 percent as fears grew over supply disruptions. Though petrol and diesel prices were eventually raised by more than Rs 7.50 per litre and domestic LPG prices by Rs. 89 per cylinder, the adjustments came too late and were insufficient. Government estimates suggest oil marketing companies have accumulated under-recoveries of around Rs. 75,000 crore during the Iran crisis. HPCL’s refining business in fact had delivered an impressive gross refining margin of $23.80 per barrel in the first quarter, compared with just $3.08 a year earlier. Yet those gains were wiped out by losses in fuel marketing. BPCL faced a similar squeeze. Higher revenues of Rs. 1.59 lakh crore during the quarter could not compensate for suppressed margins and LPG losses. This is the familiar political dilemma of fuel pricing. Governments fear the inflationary consequences of raising prices sharply, especially in an economy where transport costs influence everything from food prices to manufacturing expenses. But delaying adjustments merely shifts it from consumers to public-sector balance sheets. The consequences are already visible. HPCL reported LPG under-recoveries of Rs. 3,607 crore, while BPCL recorded losses of Rs. 3,485 crore on LPG sales. Both companies also face thousands of crores in unpaid subsidy dues. If global crude prices remain elevated, the pressure valve will eventually have to open. Either the government compensates oil companies through larger subsidies by squeezing public finances or consumers face higher fuel prices. India has long benefited from relatively stable domestic fuel prices despite global volatility. But energy markets do not respect political calendars.

Twenty-four sugar barons test political future

Rajendra Joshi
Nov 10, 2024
2 min read

Updated: Nov 12, 2024

Kolhapur: During the golden age of the cooperative movement in Maharashtra, the chairmanship of a sugar factory often attracted more attention in rural politics than a seat in the Legislative Assembly. It was through the political influence of sugar mills and cotton mills that the Congress party established its foothold in rural areas across the state. However, with the decline of the cooperative movement in recent years, rural political leaders have increasingly turned their focus towards the Assembly elections. As a result, this year, a remarkable 24 sugar barons from western Maharashtra are stepping into the electoral ring to test their political future. The weight of the sugar magnates in the upcoming assembly will largely depend on how much the rural electorate values their support.

The state elections are seeing intense competition in several constituencies, with some areas witnessing a direct contest between two sugar barons, while in others, they are up against candidates from established political parties. In Kolhapur district’s Kagal constituency, the battle between sugar factory chairmen Santaji Ghorpade of the Sarsepanthi Sakhara Cooperative Sugar Mill, currently a minister, and Samrajitsingh Ghatge of the Rajarshi Shahu Cooperative Sugar Mill, widely considered a model in cooperative management, is drawing significant attention. In Shahuwadi-Panhala constituency, former minister and leader of the Warna group, Vinay Kore, is facing off against former MLA Satyajit Patil-Sarudkar.

In Radhanagari-Bhudargad, K.P. Patil of Bidri Sugar Factory, Chandradeep Narke, former MLA from Kumbhi Sugar Factory in Karveer, and Amal Mahadik, chairman of Rajaram Sugar Factory in Kolhapur South, are also locked in fierce battles with their respective rivals.

The fight in Shirol constituency, between Ganpatrao Patil of Datt Sugar Factory and Rajendra Patil-Yadravkar, former state minister and chairman of Sharad Cooperative Sugar Factory, is another key contest.

In Sangli district, the Kadegaon constituency sees Congress’s Vishwajit Kadam facing BJP’s Sangram Deshmukh. The Shirala constituency’s contest between Mansingh Naik and Satyajit Deshmukh is also one to watch closely. In Tasgaon, the high-profile contest between former MP Sanjaykaka Patil of the BJP and the son of former home minister R.R. Patil, Rohit Patil, has been the talk of the town. In Walwa, a key battle is emerging between the NCP’s state president Jayant Patil and Nishikant Patil.

In Satara district, the Karhad South constituency is witnessing a high-stakes contest between Atul Bhosale and Balasaheb Patil from Karhad North, while the battle in Patan constituency involves sitting minister Shambhuraje Desai, and Shivendra Raje Bhosale contesting from Satara city. Wai constituency sees Makrand Patil gearing up for a tough fight, while in Maan constituency, the fight between Jaykumar Gore and Prabhakar Ghatge is expected to be a neck-and-neck affair.