Further rise in petrol prices likely, say OMCs

Oil companies losing around Rs 2 on every litre despite rise of Rs 2.95-2.96 per litre in mid-December.

With the government expressing its reluctance in raising prices of diesel and domestic LPG, the oil marketing companies (OMCs) may be forced to go for another round of increase in petrol price. The companies continue to lose around Rs 2 on every litre even after last month’s steep rise of Rs 2.95-2.96 per litre.

When OMCs increased petrol prices by Rs 2.95 per litre around mid-December, they lost Rs 1.25 per litre. This difference has now widened to Rs 2. An increase of at least Rs 1 per litre is likely if the crude price does not drop from December’s second fortnight average of $90.84 per barrel, said an executive.

While the government-controlled companies are booking revenue loss on sale of diesel, with the government refusing to bite the bullet, private sector retailer Essar Oil has increased diesel prices. The company earlier charged a premium of Rs 1-4 per litre over the public sector companies. It has now increased the premium by Rs 2-5 a litre.

The Indian basket of crude oil had averaged $87.83 per barrel in the first fortnight of December, after which companies decided to go for a jump of Rs 2.95-2.96 per litre in petrol. Crude oil averaged 3.42 per cent higher in the second fortnight of December. The basket had averaged $89.78 per barrel in December, up 6.55 per cent from the November average of $84.26. The current financial year average price is $79.35 per barrel, up 13.74 per cent from the financial year 2009-10 average of $69.76.

The petrol price was decontrolled from June 26 and any under-recovery incurred on the product will not be compensated by the government. In spite of the deregulation, the OMCs did not pass on the required increase of Rs 4.17 when they raised petrol prices by Rs 2.95.

The price of diesel, kerosene and LPG, that together account for over 60 per cent of petroleum products’ consumption, has not been increased since June 25. Currently, OMCs — Indian Oil, Bharat Petroleum and Hindustan Petroleum — have incurred under-recovery (revenue loss) of Rs 7 per litre on diesel, Rs 19.60 per litre on kerosene and Rs 366 per cylinder on domestic LPG.

Petroleum Minister Murli Deora today said his ministry was not in favour of raising diesel and domestic LPG prices as a response to the spurt in global crude oil prices since the move will add to an already high inflation rate. “We are trying not to increase prices,” he told reporters here.

Based on the increased crude oil price, the OMCs are expected to incur a revenue loss of Rs 73,000 crore in the current financial year on sale of diesel, domestic LPG and kerosene.