Increase in diesel price by Rs 3 has cheered up the private refiners, including Essar Oil and Reliance Industries (RIL). They will take the benefit of the government decision to raise prices at their outlets. While Essar may implement the hike next week, RIL will implement tomorrow.
Essar and RIL sell diesel at a premium of Rs 7-8 against what the public sector companies sell at their outlets. After the hike, the players said the differential might drop to Rs 3-4 when compared to the price at which the state-run oil marketing companies sell. Under-recovery on diesel will still be huge, said a marketing director of a private company requesting anonymity.
RIL operates 700 retail outlets, Essar has 1,381 outlets. It is constructing 254 more. RIL said it did not plan to open the remaining 700 till diesel was de-regulated.
Industry experts said, with 5 per cent scrapping of import duty on crude oil, the requirement of working capital for companies would come down. Since a major portion of private refinery production was targeted at the export market, they already got duty drawback benefit. “So, the reduction in duty will not help much,” said the expert. The private refiners, however, added that the price change and duty cut may not accrue immediately as crude oil had already been procured and paid for at the prevailing prices. Refiners have an inventory of 30-40 days. “At least a month of refining will take a beating as crude has already been procured,” said the marketing head of a private refining company.