New Delhi: Consumers in India may be in for a shocker in the coming days as petrol and diesel prices may increase by as much as Rs 4 per litre. The analyses by various brokerage firms show that the OMCs need to hike auto fuel prices in order to be profitable.
Consumer fuel prices were held constant for a period of 19 days ahead of Karnataka elections. On May 14, two days after the elections, state oil marketing companies Indian Oil Corp (IOC), Hindustan Petroleum Corp. Ltd. (HPCL) and Bharat Petroleum Corp. Ltd. (BPCL) hiked fuel prices. Since the elections, petrol prices have gone up by 69 paisa a litre and diesel prices shot up by 86 paisa per litre. On May 17, petrol was sold at Rs 75.32 and diesel at Rs 66.79 in Delhi.
ICICI Securities had estimated that auto fuel margins were weak due to price freeze during the 19 days prior to the elections. Further, a Kotak Institutional Equities report computed that Oil Marketing Companies (OMCs) need to increase retail prices of both diesel and petrol by about Rs 4 in the coming weeks to reach the gross marketing margins of Rs 2.7 per litre. This would work if the prices of crude oil prices and Rupee-US Dollar exchange rate remains stable from now.
Kotak’s report also said that the refusal to hike prices for three consecutive weeks despite the increase in global crude prices “has resulted in sharp moderation in gross marketing margins to around Rs 0.5-0.7 a litre.”
The OMCs have incurred an estimated loss of Rs 500 crore in the period of 19 days to absorb the costs of rising crude prices and weakening Rupee value in the international markets.
So in the coming days, consumers may have to shell out more money from their fuel allowance.
