Crude oil surge erodes fuel price hike gains

While raising fuel prices last week, the government had said that at $125 per barrel (the price of the Indian crude basket then), the country's oil marketing companies would incur annual revenue losses of Rs 2,45,000 crore on sales.

With the price of the basket now above $125 per barrel, the gap will be higher. Every $1 per barrel rise in the price of the Indian crude oil basket increases the total annual under-realisation by Rs 3,000 crore.

"The hike was calculated on the assumption that global oil prices would fall. As prices continue to rise, the positive effect of the hike on the oil companies will get steadily neutralised," said a senior official in the oil ministry. "There are no signs that prices will fall," he added.

The combination of price hike and duty cuts last week will reduce the under-realisation of the oil marketing companies by Rs 42,000 crore. The oil companies