Petrol prices may rise again

Business

oi-Monika Nihalani

By Monika Nihalani

Published: Wednesday, September 14, 2011, 12:15 [IST]

Yet another pinch in the pockets of a common man, as the state-owned oil companies are expected to announce another hike in petrol prices. A ministerial group is scheduled to meet on Thursday (September 15, 2011) to review the under-recoveries of oil companies.

The decision to raise prices might be taken on account of firm crude prices and weak domestic currency as the firm international crude prices and the depreciating rupee against dollar have magnified the revenue losses of major oil marketing companies (OMCs).

Revenue losses on petrol prices now stand at about Rs 3.40 a litre compared to about Rs 0.41 a litre in the fortnight ending August 31 due to increase in spot prices of the fuel.

On the flip side, rupee has depreciated to the lowest level in two years. The weaker rupee is double whammy for OMCs as the 3% depreciation in the rupee will raise their cost of crude oil imports by $11.5 million a day if prices remain undaunted.

Government last hiked petrol prices in mid-may by Rs 5 a litre, which couldn't trim their losses as they were losing Rs 10 a litre even after that hike.

The OMCs are also expected to increase the price of aviation turbine fuel (ATF) by around Rs 1,250 a kilolitre from the current Rs 56,260 a kl in Delhi.

Earnings at state-run refiners and retailers depend to a large extent on government subsidy as they are required to sell diesel and cooking fuels at government-set prices. State-owned oil companies get subsidies from the government and discount on crude products to partly offset the losses. But losses are too wide, which cannot be wholly offset by discount and subsidies.

So, there is a possibility, that prices of petrol may rise again after Thursday's meeting.

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