Business

Oil majors expected to hike petrol, diesel prices by Rs 4 per litre to cover pre-Karnataka poll hiatus margins

Written by PaperDabba

Oil majors expected to hike petrol, diesel prices by Rs 4 per litre to cover pre-Karnataka poll hiatus margins

Photo:PTI

A Rs 4 per litre increase in petrol and diesel prices is required to cover margins caused by pre-Karnataka poll hiatus, brokerage firms quoted by PTI said. 

No sooner had Karnataka polled to elect a new state government, state-owned Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) on Monday ended a 19-day hiatus in revising petrol and diesel prices and reverted to the practices of changing rates on a daily basis.

Related Stories

Since then petrol price has risen by 69 paisa a litre, including a 22 paisa hike effected today that took rate in Delhi to Rs 75.32, the highest in almost five years. Diesel prices have gone up by 86 paisa a litre, including 22 paisa increase today that took the rate to their highest ever of Rs 66.79 a litre in Delhi.

“Our computation suggests that downstream oil marketing companies (OMCs) are required to increase retail prices of diesel by a steep Rs 3.5-4 a litre and gasoline (petrol) by Rs 4-4.55 per litre in the coming weeks to earn normative gross marketing margins of Rs 2.7/litre,” Kotak Institutional Equities said in a report.

The increase is based on assumption that global price of diesel and petrol and Rupee-US Dollar exchange rate remain stable hereon.

“We note that the lack of price hikes over the past three weeks, before Karnataka elections amid a sharp increase in global crude/product prices, has resulted in sharp moderation in gross marketing margins to around Rs 0.5-0.7 a liter,” it said.

Last week, ICICI Securities had said that auto fuel net marketing margins were weak at Rs 0.31 a litre due to no price hike after April 24.

OMCs returned to daily price revision from May 14. They are estimated to have lost about Rs 500 crore on absorbing higher cost resulting from the spike in international oil rates and fall in rupee against the US dollar.

The benchmark international rate for petrol, used for revising rate on April 24, had gone up from $78.84 per barrel to $82.98 on May 14. It has further risen to $83.30, indicating more daily hikes would be needed to level retail price with cost.

Similarly, benchmark international diesel rates during this period have climbed from $84.68 per barrel to $88.93. Also, the rupee has weakened to Rs 67.06 per US dollar from Rs 66.62, making imports costlier.

(With inputs from PTI)

Advertisements

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.