Fuel oil, naphtha prices hiked

Prices of furnace or fuel oil and naphtha, important feedstocks for manufacturing industries, have been hiked yet again by oil refiners.

Furnace oil is up 17 per cent over the last three months after factoring in the latest increase of Rs 660 a tonne. Prices are at Rs 23,014 a tonne from Rs 19,670 a tonne earlier.

The price of naphtha has been pushed up by Rs 400 a tonne to Rs 37,502 - an increase of 20 per cent in the last three months. During the period, crude oil rallied from $79 a barrel to $99 a barrel.

According to analysts, the increase in the prices of fuel oil and naphtha will have an impact on industry margins.

Public sector oil marketing companies are free to determine the prices of fuel oil, naphtha and other petrochemicals. Only petrol, diesel, kerosene and LPG prices are controlled by the government.

The hike in prices will cause a Rs 3-4 per unit rise in the cost of power generation for naphtha-based power plants.

Fertiliser companies, which use naphtha as a fuel for power generation, may see their per unit power cost rising from Rs 8 a unit to Rs 12. The fertiliser industry's power and fuel cost accounts for 14.5 per cent of the total cost.

"This price hike will also impact the long-term fuel choices of user industries, who will look for alternate fuel such as natural gas,'' said an analyst.

Other energy-intensive industries such as cement, steel and fertiliser will also feel the heat of the price hike.

Naphtha is widely used in the petrochemical, fertiliser and power industries.