Home > Auto > News > Fuel price rise may continue in June but quantum may reduce: Sources
FILE PHOTO: While the current retail price hikes are encouraging, further price hike of  ₹5.5 per litre (7-8 per cent) is needed if net margin of oil marketing companies is to recover to  ₹1.19 per litre on July 1, 2020, as per a report. (REUTERS)
FILE PHOTO: While the current retail price hikes are encouraging, further price hike of 5.5 per litre (7-8 per cent) is needed if net margin of oil marketing companies is to recover to 1.19 per litre on July 1, 2020, as per a report. (REUTERS)

Fuel price rise may continue in June but quantum may reduce: Sources

  • After 83 days break since March 16, oil marketing companies have started raising petrol and diesel prices daily from June 7.
  • In the nine days since then, petrol prices have risen by 5 per litre while diesel prices have gone up by 5.23 per litre.

Consumers are unlikely to get respite from the rising price of auto fuels - petrol and diesel as oil companies plan to cover their entire gap of around 8 per litre on sale of the two petroleum products by raising retail prices daily for at least next two weeks.

But the quantum of increase may fall from around 60 paise per litre, giving some respite to consumers in midst of several disruptions due to Covid-19 pandemic.

After 83 days break since March 16, oil marketing companies have started raising petrol and diesel prices daily from June 7. In the nine days since then, petrol prices have risen by 5 per litre while diesel prices have gone up by 5.23 per litre.

Petrol price increased by 48 paise and diesel by 59 paise per litre to 76.26 and 74.62 per litre respectively on Monday in the national capital.

Sources in public sector oil companies said that petroleum products may continue its daily upward movement till the end of the month or earlier but from now on the increase may be lesser by around 30-40 paise per litre.

"Global oil prices have again fallen below $40 a barrel and product prices have also decreased marginally. If this holds, there could actually be a reduction in petrol and diesel prices from next month," an official said.

(Also read: Cess on petrol and diesel increased by 1 in Madhya Pradesh)

As per a report from ICICI securities, while the current retail price hikes are encouraging, further price hike of 5.5 per litre (7-8 per cent) is needed if net margin of oil marketing companies is to recover to 1.19 per litre on July 1, 2020.

Employees of Auto Motives Hindustan Petroleum petrol pump wearing Personal Protective Equipment Kit (PPE Kit) while attending to the customers, in New Delhi.
Employees of Auto Motives Hindustan Petroleum petrol pump wearing Personal Protective Equipment Kit (PPE Kit) while attending to the customers, in New Delhi.

While prices have now gone up by over 5 per litre, the projected fall in OMCs net marketing margin would need petrol and diesel prices to rise by another 4-5 a litre to make margins again.

The OMCs could also get support from global oil market where crude prices have dropped to below $40 a barrel now. If this sustains, there is a possibility that petrol and diesel prices may actually begin to fall from July.

(Also read: Prices of petrol and diesel should be brought under GST, says Congress)

Net auto fuel marketing margins are back in the black at 0.2 per litre from minus 1.28 per litre on June 6, 2020 due to retail price hikes. It has covered further ground after nine days of increase in auto fuel prices.

Net marketing margin of OMCs slipped into the red to minus 1.28 per litre during June 1-6, 2020 due to surge in refinery transfer price (RTP) by 5.6-7.1 per litre from the low on May 1, 2020 and hike in excise duty by 10-13 per litre, which was absorbed by OMCs.

Net margin would be 6.09 per litre in Q1FY21E if price hikes are made, but 5.18 per litre if no further hikes are made. If price hikes are made, net margin may be 2.17 per litre (down 2 per cent YoY) in FY21E assuming it at 1.19 per litre in Q2-Q4

This story has been published from a wire agency feed without modifications to the text.

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