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Oil marketing companies (OMCs) are hopeful of adding to their recent gains on Thursday, when the Congress’ core committee is likely to take a call on a higher dose of diesel price rise.
The companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — have had reasons to smile recently: The rupee had recovered about five per cent in 20 days, translating into gains in the Indian basket of crude oil prices, and international crude oil price had come down.
Experts said this would help reduce the combined underrecovery of the OMCs to around Rs 1,50,000 crore for the financial year, from the Rs 1,81,000 crore expected as of the end of August. This could reduce OMCs’ pressure to increase fuel prices, giving some relief to public.
The price of the Indian crude oil basket was $114.07 a barrel on August 29; it came down to $108.64 a barrel this Tuesday.
In rupee terms, after an all-time high of Rs 7,557.99 a barrel on September 3, a day before Raghuram Rajan took charge of the Reserve Bank of India and set in train a series of announcements that helped the rupee to stabilise, the Indian basket had come down to Rs 6,885.6 a barrel on Tuesday.
Some help came from the US deciding not to bomb Syria for its alleged use of chemical weapons. Fear of such an attack had put pressure on international crude oil prices.
“The appreciation of the rupee will surely have an impact on underrecovery. International prices came down following clarity on Syria (crisis) and OMCs got some relief,” said Debashish Mishra, senior director, Deloitte India.
The relief comes in the backdrop of Petroleum Minister M Veerappa Moily pegging the underrecovery figure at Rs 181,000 crore for 2013-14 and suggesting a plan to cut the foreign exchange outflow by $20 billion. Making a case for a larger diesel price rise, the minister had said Rs 70,500 crore of the expected amount could be met through upstream assistance, while the remaining Rs 97,500 crore should be met through Budgetary support from the government or “appropriate increase in the prices of diesel, domestic LPG and kerosene.”
The underrecovery on diesel for the second fortnight of September was Rs 14.50 a litre. That on kerosene and domestic LPG stood at Rs 36.83 a litre and Rs 470.38 a cylinder, respectively.
“Unless something drastic happens, the prices are going to be in the range of $105-110 a barrel for some time. Russia not backing the US stance on attacking Syria had a positive impact. From $118.11 a barrel, Brent crude prices came below $110 a barrel,” said Dhaval Joshi, research analyst, Emkay Global Financial Services.
