Essar prepares to cut petrol, diesel prices.
The sustained decline in the price of crude oil has reversed the trend in petroleum product pricing. Private retailers are looking to cut prices from next month, while public sector oil companies have shaved their losses on retail sale of petrol and diesel by more than half.
The Indian basket of crude oil averaged $82.40 per barrel during the first fortnight of this month. The average price for the second fortnight, till May 21, was 8.55 per cent lower, at $75.35 per barrel. Crude oil prices touched an 18-month high of over $87 a barrel in early April. Of late, prices have been declining, owing to the European crisis.
Essar Oil, which has 1,339 fuel outlets, will be cutting petrol and diesel prices by Rs 1.50 a litre. As of now, the company sells petrol and diesel at a premium of Rs 4 and Rs 2.50 a litre, respectively, in all states, except Gujarat. The company had raised prices on April 1.
The price of aviation turbine fuel (ATF) is also expected to come down by over four per cent or Rs 1,500-2,000 per kl. Currently, ATF is sold at Rs 42,556 per kl in Delhi. All oil companies are expected to reduce ATF prices.
A declining crude oil price could turn the fuel retailing business profitable, hope Reliance Industries and Essar Oil. “If the trend continues, we hope to come in the positive region and sell sizable volumes. If crude settles at $67.75 per barrel at the current currency levels, the retail business will turn positive,” said S Thangapandian, chief executive officer (marketing) Essar Oil.
The dip in crude has also had a positive impact on the government oil companies. During the first fortnight of this month, the oil marketing companies (OMCs) — Indian Oil, Bharat Petroleum and Hindustan Petroleum — were losing Rs 6.63 on every litre’s sale of petrol, while the loss on every litre of diesel was Rs 6.25. However, in the current fortnight, the loss on diesel and petrol is Rs 2.58 and Rs 2.61 a litre, respectively. These will come down further in the first fortnight of June.
While the OMCs purchase crude oil at internationally benchmarked prices, the sale price of petrol, diesel, kerosene and LPG are capped by government order. The OMCs’ revenue loss on the sale of these products during 2009-10 was estimated at Rs 46,000 crore. For the current year, a projection of Rs 98,000 crore was made when crude oil was around $80 per barrel. This would reduce substantially if the price remains at the present level.
