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There is no instruction to hold back price rise: MK Surana, HPCL

Talking to ET Now, MK Surana, CMD, HPCL, says crude prices s..

Talking to ET Now, MK Surana, CMD, HPCL, says crude prices spiking due to geopolitical reasons and $65 to $70 is a better range.

Edited excerpts:

What is the update on the ONGC-HPCL merger?

Both the companies will work on that, we are working out the synergies between the two companies. We need to tie up all the ends and once we are ready with a potential development, we will let you know.

Do you think that the $70 price range is the new normal for crude oil?

I would not say so yet. Of course, in the recent past, twice or thrice, it has gone up to $70. Today I think it is $72 and it is guided by the fundamentals and the geopolitical situation. Third thing is speculation. Right now, there are certain news items which dries up the momentum in the direction the prices are moving. Geopolitically, there is also a meeting on Iran, there are some disturbances in Venezuela as well and yesterday night there was some other news items which are suggesting a price hike. A good demand is also aiding to that extent. If the geopolitical situation calms down, I still hope it will rebound from there. If the geopolitical situation continues like that, then high prices will be a norm but otherwise I will still try to suggest $65 to $70 is a better range.

How is HPCL looking to hedge itself against high crude prices?

HPCL has got a robust risk management system which periodically helps certain mitigation measures and we keep on reviewing those positions. We have got a system in place, we do not try to do our risk mitigation from the point of view of speculation but we do from the point of balancing the market situation.

Saudi Arabias energy minister yesterday said that Aramco plans to invest in a big way in India, selling fuel on a retail basis in cities and neighbourhoods. Do you see that happening anytime soon because you will have a very big competitor in the field?

No, competition cannot be avoided, rather competition brings in certain efficiency also and so we will deal with it. We have dealt with the competition in the past and we will deal with it in future also. Yesterday, we had got into an agreement with Saudi Aramco for west coast refinery and that is a good move as far as country is concerned. That a big company like Saudi Aramco wishes to make a big investment in India and we will then come definitely.

When the competition comes, we will also have our own studies to deal with it and in the past also, we are competing in the market and we will continue to compete in the market.

Given the fact that crude prices have been spiking up a little bit, do you think in the background of important state elections coming up, OMCs will be able to pass on the higher board into the consumers because in Gujarat we saw OMCs had to hold back the prices before the polling happened. Do you see the same happening here?

We will have to see as there are no such instructions.

If it is indeed born by the oil marketing companies (OMCs), how will the price rise hurt your margins?

We will see when we come to that situation. As of now, there is nothing like that.

Any representation made to the finance ministry on the duty and excise part of it?

No oil companies have made the proposition to cover the petroleum products under GST and we continue to hold that position. It is better to bring the petroleum products under GST.

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