Petrol and diesel prices were raised by up to 91 paise per litre on Saturday, taking the cumulative increase in retail fuel rates to nearly ₹5 per litre in less than 10 days, as state-run oil marketing companies (OMCs) intensified pass-through of rising global oil prices amid mounting under-recoveries and pressure on fuel marketing margins.
Petrol prices were raised by 87 paise per litre in Delhi to ₹99.51 from ₹98.64 earlier, while diesel prices were increased by 91 paise to ₹92.49 per litre from ₹91.58 previously. The latest revision follows a ₹3 per litre increase in petrol and diesel prices on May 15 and another 90 paise per litre hike on May 19, ending a prolonged freeze in retail fuel prices.
Compressed natural gas (CNG) prices were also increased by Re 1 per kg on Saturday, marking the third hike in recent days and taking the cumulative increase to ₹4 per kg since May 15. CNG prices in Delhi were raised to ₹81.09 per kg from ₹80.09 earlier, according to Indraprastha Gas.
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After the latest hike, petrol prices at PSU retail outlets in Mumbai rose to ₹108.49 per litre and diesel to ₹95.02 per litre, while Kolkata prices increased to ₹110.64 and ₹97.02, respectively. In Chennai, petrol now costs ₹105.31 per litre and diesel ₹96.98 per litre.
Rising Under-Recoveries
“OMC still incurring under-recoveries of ₹700 crore per day considering crude price of $120-125/bbl,” said Prashant Vasisht, senior vice-president and co-group head, corporate ratings, ICRA.
Sourav Mitra, partner, oil and Gas, Grant Thornton Bharat, said the recent back-to-back fuel price increases would provide only partial relief to OMCs but not a full cushion, adding that even if the West Asia situation stabilises, risks around the Strait of Hormuz could keep crude oil prices elevated above $90 per barrel. “Combined with a weakening rupee, this continues to pressure OMC margins, and they could still face under-recoveries. Going forward, some calibrated price revisions may be required,” he said.
Financial services firm Emkay Global has estimated that petrol and diesel prices could rise by as much as ₹10 per litre in the near term as OMCs attempt to recover losses arising from elevated crude oil prices.
“We expect hikes of ₹10/litre to cover roughly 50% of under-recoveries, either in one shot or via creeping hikes over two-three weeks,” Emkay Global said in a report released on May 15.
Surging Demand Mismatches
Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL), which together control nearly 90% of India’s fuel retail market, have witnessed a sharp jump in fuel sales in recent days.
In a statement, IndianOil said petrol sales rose 14% year-on-year during May 1-22, while diesel sales increased by around 18%. “The current situation being witnessed at certain retail outlets is highly localised and temporary in nature, arising due to local demand-supply imbalances and redistribution of sales patterns in select areas,” IOC said.
The company attributed higher fuel demand to seasonal harvesting-related diesel consumption, migration of commercial buyers to PSU pumps and higher retail prices at certain private outlets.
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On the gas front, Mitra said dwindling domestic APM gas supplies and rising dependence on imported LNG were likely to keep pressure on CNG and piped natural gas prices as well.
“With higher-cost LNG being blended into the supply mix, upward pressure on input costs of CGD entities will increase. This will eventually have to be passed on to end users with increased CNG prices in the near term,” he said, adding that similar cost pressures could gradually reflect in residential PNG prices too. IndianOil said it continues to maintain adequate overall stocks and supplies of petrol and diesel across the country and urged consumers to avoid panic buying.
TOPICSDieselfuel pricesPetrol PricePetroleumThis article was first uploaded on May twenty-three, twenty twenty-six, at thirty-nine minutes past six in the evening.