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MAY 16 2018

Petrol, diesel prices rise on Tuesday after 19-day freeze

  • Economic Times, ET Bureau / Hyderabad
  • Created: Wed 16th MAY 2018


Petrol and diesel prices across the country were raised second consecutive day on Tuesday, after the 19 day freeze on price changes by Oil Marketing Companies (OMCs). Analysts say prices could go up by additional Rs 4 per litre in coming days with oil firms trying to recover their marketing margins.

Retail price of petrol in the national capital was increased by 15 paise on Tuesday to Rs 74.95 per litre, the highest price since September 2013 and diesel prices were increased by 22 paise to Rs 66.36 per litre, the highest recorded level.

“With the Karnataka elections now over, prices have started to rise like it did in after Gujarat in Dec 17 although a full normalization would still require prices to rise another Rs 4.2 per litre or by 6 per cent,” Equity research firm Jefferies said in a report. It added the OMCs margins have fallen to Rs 0.25 per liter from Rs 2.5 per liter for both the auto fuels around 16 April.

The report also stated the marketing margins of OMCs has been severely impacted and reached a low of Rs 0.25 per litre because the retail prices were frozen since 24 April at a time when crude prices have gone up and the rupee depreciated against the dollar.

Prices of petrol and diesel in India are worked out based on the average of the trailing 15 days of benchmarked Arab-Gulf fuel prices which move in tandem with global crude oil prices. Refiners add insurance, a few other charges as well as excise duty, state Value Added Tax (VAT) and Dealers commission to international fuel rate to determine the retail price.

An Economic Times analysis of the price build-up at Bharat Petroleum’s (BPCL) Delhi filling station shows the Cost and Freight prices of petrol and diesel have increased by $2.9 per barrel and $2.64 per barrel, respectively, between April 25 and May 10 when the freeze on prices was lifted. Oil PSUs kept retail prices unchanged for nearly three weeks before Karnataka elections in spite of the surge in international fuel prices and Rupee’s depreciation.

This, however, was not the only time oil PSUs kept prices unchanged before state elections. An analysis of historical fuel price changes by Indian Oil (IOC) shows the company had kept the prices static between 16 January 2017 and 1 April 2017, when the company followed fortnightly revision of fuel prices. Five states including Punjab, Goa, Uttarakhand, Uttar Pradesh and Manipur had elections during the January-April 2017 period.

Defending the freeze in petrol and diesel prices, Sanjiv Singh, Chairman and Chief Executive Officer (CEO) at Indian Oil Corporation (IOC) last week said that the increase will be passed on to the consumers in due time, without disclosing the increase or the time frame. He also added the freeze in fuel prices by all the three OMCs was not synchronized nor was it an attempt at cartelization and explained that OMCs do have discretionary powers when it comes to pricing of fuels.

M K Surana, chairman at Hindustan Petroleum (HPCL) said in an interview that if the international fuel prices continue to surge, OMCs will have to pass on the increase to consumers.

The rise in international fuel prices is not the only reason for domestic retail prices touching record highs. The government has since 2014 increased excise duty on petrol and diesel 10 times taking away the gains arising from falling crude prices. The centre had cut excise duty on petrol and diesel by Rs 2 per litre in October last year for the first time in four years.

According to the price build-up data for fuels provided by IOC, 42 per cent of the total diesel price charged to consumers comprises taxes while the tax component stands at 52 per cent for petrol.


Delhi Uttar Pradesh Uttarakhand Punjab TOTAL Gujarat Goa Manipur Karnataka Goa Oil Diesel Fuel price Oil Marketing Companies Petrol Diesel Prices Petroleum Hindustan Petroleum Corporation Limited Bharat Petroleum Corporation Limited Public sector units Tax Excise Duty Crude Oil India BPCL PUNJAB

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