Petrol and diesel prices were raised by up to ₹2.71 per litre on Monday, the fourth increase in less than two weeks, as state-run oil marketing companies (OMCs) accelerated delayed pass-through of soaring global crude oil prices even as daily losses remained close to ₹600 crore despite cumulative fuel price hikes of about ₹7.5 per litre since May 15.
In Delhi, petrol prices rose to ₹102.12 per litre from ₹99.51 earlier, while diesel prices increased to ₹95.20 from ₹92.49.
The latest revision follows a ₹3-per-litre increase on May 15, a 90-paise hike on May 19 and another increase on May 23, when petrol prices were raised by 87 paise and diesel by 91 paise per litre.
“The losses are slightly less than ₹600 crore per day,” Sujata Sharma, joint secretary in the ministry of petroleum and natural gas, said on Monday.
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According to Sharma, daily losses on petrol, diesel and domestic LPG sales were around ₹1,000 crore before the latest cycle of fuel price revisions began earlier this month.
Escalating Geopolitical Tensions
Global crude prices have risen more than 50% since late February after US-Israeli strikes on Iran and escalating tensions in West Asia disrupted shipping movements and pushed up freight and insurance costs.
Despite four successive revisions, analysts said OMC under-recoveries remain elevated because of higher crude prices, a weaker rupee and continuing losses on domestic LPG sales.
Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA Ltd, said the financial stress on fuel retailers remained severe even after the latest hikes.
“Despite the latest hike in retail prices of auto fuels, oil marketing companies’ under-recoveries remain stubbornly high due to increasing losses in domestic LPG sales and a high premium to the crude marker,” Vasisht said.
ICRA estimates that at crude oil prices of $120-125 per barrel, OMCs are still incurring losses of around ₹700-800 crore daily on petrol, diesel and LPG sales.
“This high level of under recoveries is unsustainable,” he added.
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/lt to cover roughly 50% of under-recoveries, either in one shot or via creeping hikes over 2-3 weeks,” Emkay Global said in a report released on May 15.
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Harshraj Aggarwal, Energy Lead Analyst, Institutional Equities, YES Securities, said the latest fuel revisions still leave substantial marketing losses on auto fuels.
“The gross marketing loss as of today stands at ₹5.5/ltr for petrol and ₹5/ltr for diesel. So the expected price hikes could be more ₹2-4/ltr if the crude prices don’t fall further,” Aggarwal said.
Fiscal Implications
The latest increase pushed fuel prices to their highest levels since May 2022 after remaining largely frozen for more than two years, barring a ₹2-per-litre cut in March 2024 ahead of the general elections.
Earlier in the day, speaking at the 37th Foundation Day Celebrations event of Small Industries Development Bank of India (SIDBI), Finance Minister Nirmala Sitharaman on Monday said the reduction in excise duty on petrol and diesel would have a revenue implication of nearly ₹1 lakh crore.
The rise in fuel prices is also adding to inflation concerns. Retail inflation accelerated to 3.48% in April from 3.40% in March, while wholesale inflation climbed to a 42-month high of 8.3%, driven largely by higher fuel and energy costs.
Meanwhile, shares of oil marketing companies rallied sharply on Monday after Brent crude prices fell more than 5% following indications that the Strait of Hormuz could reopen.
Shares of Bharat Petroleum Corporation (BPCL) rose 4.3% to close at ₹308.25 on the BSE after touching an intraday high of ₹309. Hindustan Petroleum Corporation (HPCL) gained 3.5% to settle at ₹403.40 after rising as much as 5.9% during the session to hit ₹412.55. Shares of Indian Oil Corporation (IOC) advanced 3.1% to close at ₹143.90 after touching an intraday high of ₹145.30.
TOPICSPetroleumThis article was first uploaded on May twenty-five, twenty twenty-six, at four minutes past eight in the night.