New Delhi: The increase in petrol prices effective Thursday midnight by state-owned oil refiners may be followed by another hike by the end of this month, increasing inflationary pressures.
Indian Oil Corp. Ltd (IOC) is raising its price by Rs 3.14 per litre and Hindustan Petroleum Corp. Ltd (HPCL) by Rs 3.16 a litre in Delhi. After the latest increase, petrol will cost Rs 66.84 a litre at IOC outlets in Delhi, Rs 71.92 in Mumbai, Rs 71.28 in Kolkata and Rs 70.82 in Chennai.
The increase gives the opposition more ammunition against Prime Minister Manmohan Singh’s government in the backdrop of corruption scandals and a steep rise in prices, especially food. More expensive fuel will add to commodity prices.
In what may add to consumer woes, an empowered group of ministers (eGoM) on pricing of petroleum products headed by finance minister Pranab Mukherjee is scheduled to meet on Friday to discuss capping the number of subsidized domestic gas cylinders.
“The factors resulting in to the revision of the MS (motor spirit, or petrol) price are increase in the international price of MS and the weakening of the rupee against the dollar,” IOC said in an emailed release. “These factors have resulted in increase in the losses on MS to Rs 2.61 per litre from Rs 0.41 per litre on 1st September 2011.”
The company has raised the price by Rs 2.61 a litre, which, combined with local levies, will translate into different prices across the country, said a top IOC executive, who didn’t want to be identified. “If the crude oil prices continue to increase, there may be another price hike in the next 15 days.”
Of Rs 121,571 crore in losses from selling fuel at less than the market price expected to be borne by the state-owned refiners for 2011-12, Rs 5,300 crore is likely to be on account of petrol sales. The refiners have registered a combined loss of Rs 2,427 crore till 15 September on account of petrol sales.
“Following the petrol price increase, the under-recoveries on account of petrol sales have been wiped off,” said the IOC executive cited above. IOC is India’s largest oil marketing company and has a 49.6% share in the country’s fuel retail market.
The refiners last raised petrol prices in May followed by the government increasing diesel, kerosene and domestic cooking gas prices by Rs 3 per litre, Rs 2 per litre and Rs 50 per cylinder, respectively, on 24 June. While the Congress party-led United Progressive Alliance government decided to free petrol prices from state control in June last year, refiners still sell diesel at a government-mandated price.
The average price of crude oil in the Indian energy basket was $110.65 per barrel in May, when the petrol prices were last raised and is hovering around $110 per barrel in the current month. The current year’s average of crude oil in the Indian energy basket is $111.54 per barrel.
“We depend on crude import to the extent of almost 80%. Therefore, price increase of petrol is rather a compulsion for survival of oil marketing companies even if it is a shock to the common people. I think both politics in business and business in politics are bad,” said U.D. Choubey, director general of the Standing Conference of Public Enterprises, the apex body of state-owned firms and former chairman and managing director of GAIL (India) Ltd.
After the petrol price increase, refiners will lose Rs 263 crore a day because they sell kerosene and cooking gas at a loss.
Political parties opposed the increase.
The opposition Bharatiya Janata Party (BJP) “vehemently protests against the petrol price hike... We will pressurize the government to roll back the price hike”, said spokesperson Shahnawaz Hussain. The BJP is to hold a protest against the price hike at Jantar Mantar in Delhi on Friday.
“We are opposed to these hikes in petrol prices. We have been asking the government to revise the tax structure. If the government revises the excise and tax structure, then there would be no need for such price hikes but the government is not doing it,” said S. Ramachandran Pillai, Communist Party of India-Marxist politburo member.
Ruhi Tewari and Anuja contributed to ths story.