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Falling crude oil prices could bring some relief to users with public and private oil marketing companies planning to cut retail fuel prices. While government-controlled oil marketing companies (OMCs) could reduce petrol price by around Rs 2.50 a litre, Essar Oil is planning to reduce diesel price at its retail outlets by over Rs 3.
The current drop in prices would bring the gap between fuel sold at Essar Oil's retail outlets and public sector retail outlets, down by Rs 3. At present, diesel at Essar retail outlet costs Rs 6.50 a litre more than it would at any public sector retail outlet. "Diesel prices at our outlets could drop heavily from May 1," said an Essar Oil executive who did not want to be named.
A senior oil marketing company official said, "If international crude oil prices continue to slide with rupee strengthening against the dollar, petrol prices could see some let up in May." Oil companies review retail oil prices on 15th and 30th of every month.
Petrol price since the beginning of March has come down by Rs 4.65 a litre to little over Rs 66 in Delhi. The differential between petrol and diesel price is still high at Rs 19.37 even though OMCs have increased diesel price thrice since the government decided to decontrol the fuel in a phased manner this January. The price was last increased by 45 paise a litre on March 22. But OMCs decided to skip the monthly hike this month. With Karnataka state elections due next month and Parliament in session, the government informally asked the companies to take a pause.
Despite the falling crude oil prices, the revenue loss on diesel for OMCs is still over Rs 4. In case of PDS Kerosene and domestic LPG, under-recoveries for the month of April 2013 remain at high levels of Rs 30.49 per litre and Rs 434.52 per cylinder respectively. OMCs effective 16 April, are incurring daily under-recovery of about Rs 348 crore on the sale of Diesel, PDS Kerosene and Domestic LPG.
For April month so far, the benchmark Indian crude oil basket averaged at $101.60 a barrel against the March average of $106.45. It closed at $100.64 last week. Brent has a 31.8 per cent weight in the Indian basket with Dubai-Oman crude oils constituting 68.2 per cent.
In the last seven years, petroleum subsidy has more than doubled. Though the government had budgeted only Rs 40,000 crore in petroleum subsidy in 2012-13, the gross subsidy for the sector is estimated to be Rs 1,55,000 crore, of which Rs 96,880 crore is already on government shoulders.
Phased decontrol of diesel price and capping of subsidised LPG cylinders is likely to reduce petroleum subsidy this year. The government has budgeted a 33 per cent reduction at Rs 65,000 crore for 2013-14 but the over the past few years its estimates have gone awry.
