Petrol and diesel prices hiked for first time in over four months

Up 80 paise a litre; domestic gas cylinder now dearer by Rs 50

After a long hold-up owing to the Assembly elections in five states, public-sector oil-marketing companies (OMCs) on Tuesday raised petrol and diesel prices by 80 paise a litre each and that of domestic cooking gas by Rs 50 a cylinder.

The increase comes after more than four and a half months since the last revision.

Petrol in Delhi will now cost Rs 96.21 per litre as against Rs 95.41 as on Monday, while the diesel rate has gone up from Rs 86.67 per litre to Rs 87.47, according to a price notification of state-owned fuel retailers.

In Mumbai, the petrol price has been hiked by 84 paise per litre to Rs 110.82, and diesel by Rs 86 paise to Rs 95. 

The impact of the decision will be marginal on the consumer price index (CPI) inflation rate but the prices are likely to continue to rise in the next few days.

The increase may not be sufficient to make good the losses of the OMCs because they froze prices for a record 137 days due to the elections.

Meantime, the international rates of the Indian basket of crude have risen from $73.47 a barrel at the time of the last increase on November 4 to $108.25 a barrel as on March 18.

In this period, the global crude oil prices also rose to more than $130 a barrel. To make matters worse, the rupee depreciated from 74.53 a dollar at the time of the last revision to 76.08 as on Tuesday.

A few days ago, OMCs also raised diesel prices by Rs 25 a litre for bulk buyers.

Hetal Gandhi, director, CRISIL Research, said: “The first hike in fuel prices in about five months -- by a massive Rs Rs 25 per litre for bulk diesel buyers, and 80 paise at the retail level for petrol and diesel -- is unlikely to materially support the marketing margins of the OMCs.”

Petrol and diesel prices need to be increased by up to Rs 25 a litre for fuel retailers to cover the losses they incurred when they kept the rates on hold despite the rise in the cost of raw material, industry sources said.

“The initial price hike is small. The magnitude of the hikes that will be undertaken ahead will determine the upside to inflation and downside to growth,” ICRA Chief Economist Aditi Nayar said.

The CPI inflation rate has been above the RBI’s mandate of 6 per cent for the two straight months of January and February.

Simultaneously, the price of non-subsidised LPG has been increased to Rs 949.50 per 14.2-kg cylinder in Delhi and Mumbai, and to Rs 976 in Kolkata.

LPG rates were last revised on October 6, 2021.

LPG prices had gone up by close to Rs 100 per cylinder between July and October 6, 2021, before criticism halted the monthly revision in rates.

Non-subsidised cooking gas is the one that consumers buy after exhausting their quota of 12 cylinders at subsidised or below market prices.

However, the government pays no subsidy on LPG in most cities, and the price of the refill that consumers, including the women who got free connections under the much-talked-about Ujjwala scheme, pay is the same as non-subsidised LPG.

A 5-kg LPG cylinder will cost Rs 349, while the 10-kg composite bottle will come at Rs 669. The 19-kg commercial cylinder costs Rs 2,003.50.

This is the highest rate ever that subsidised LPG users will pay. The non-subsidised rate had peaked at Rs 1,241 in January 2014, but at that time, the government provided as much as Rs 600 per cylinder as subsidy.

Direct LPG subsidy was stopped in May 2020. A small sum is paid to cooking gas users in far-flung areas to compensate them for higher freight.

Since June 2017, petrol and prices are being adjusted daily in line with benchmark international rates in the preceding 15 days. But rates have been on the freeze since November 4, 2021, just after the government cut excise duty on petrol by Rs 5 per litre and that on diesel by Rs 10 a litre. Most state governments too lowered local sales tax or value-added tax.