State-run oil firms prove indispensable during crises
State-owned oil companies in India have demonstrated their critical role during emergencies such as floods and geopolitical conflicts, despite repeated attempts to privatise them. According to industry officials, private-sector fuel retailers like Nayara Energy and Shell raised pump prices by a steeper margin during periods of high global crude prices, whereas public sector undertakings (PSUs) absorbed costs to shield consumers.
Private players pass on higher costs faster
Data from the past year shows that private companies adjusted retail prices more frequently and sharply in response to rising international oil prices. For instance, when crude oil surged past $90 per barrel, private retailers hiked petrol and diesel prices by up to ₹3-4 per litre within weeks, while state-run firms like Indian Oil, BPCL, and HPCL held prices steady for months. This contrast highlights the stabilising role of PSUs in the fuel market.
Government privatisation efforts face hurdles
The central government has previously attempted to sell stakes in BPCL and HPCL, but strategic disinvestment plans have faced delays due to volatile oil markets and geopolitical uncertainties. The Russia-Ukraine war and subsequent supply disruptions further underscored the need for state control over energy security. Industry analysts note that private companies prioritise profit margins, making them less reliable during supply shocks.
Impact on consumers and inflation
The pricing divergence has direct implications for household budgets. During the 2022-23 period, state-run firms kept fuel prices unchanged for over 140 days, helping contain inflation. In contrast, private players raised prices by nearly 10% in the same period. This has led to calls for retaining PSU dominance in the retail fuel sector, despite efficiency concerns.
Future outlook for oil PSUs
With global energy transitions underway, the role of state-run oil companies is evolving. They are investing in renewable energy and green hydrogen projects, while also maintaining strategic petroleum reserves. The government has indicated that privatisation will proceed only in a calibrated manner, ensuring that energy security is not compromised. As one oil ministry official stated, 'PSUs remain the backbone of India's energy infrastructure, especially in times of crisis.'
