Petrol, diesel prices may rise again after daily price revision restarts
Amid Covid-19 disruption, fuel consumers could further face the heat from rising fuel prices with public sector oil marketing companies (OMCs) bracing up to restart daily price revision of the retail price of petrol and diesel later this month.
Sources in OMCs said the daily price revision of auto fuels may start again once the lockdown is lifted or more relaxations are announced by the government later in the month. However, no decision has been taken on it now.
If this happens, petrol and diesel prices can start rising again every day as global oil market has also studied gaining more than 50 per cent over last months prices to around $30 a barrel now.
"Petrol and diesel prices have not been revised since March 16 (it went up in Delhi on May 5 only after state government raised VAT) and that gave cushion to the government to steeply raise excise duty on the two products without impacting their retail prices. But that cushion is no longer there now and once daily price revision plan starts, auto fuel could see steep rise over the course of few days," said an official of a public sector OMC asking not to be named.
However, government sources indicated that the retail price of petrol and diesel may not be allowed to increase beyond a point even if the daily price revision restarts. This would mean that the petroleum products could increase marginally every day by 30-50 paisa or even lower till the oil companies are able to eliminate the gap between cost and sales.
The increase in retail price under daily price revision would depend on prevailing oil prices and global oil market at the time to determine the retail price. Going by the current trend, crude prices are up over 50 per cent to last months prices when even benchmark Brent crude had slipped below $20 a barrel. It is at $30 a barrel now. But lockdown has also curbed demand for auto fuel. This could maintain some check on prices.
Petrol is retailing at ₹71.26 a litre while diesel at ₹69.39 a litre in Delhi. Before this the two maintained a price of ₹69.59 and 62.28 between March 16 and May 4. The price rise to the current level in Delhi from May 5 as state government raised VAT on the products to raise revenue to meet rising expenditure needs to check Covid-19 spread.
Raising retail prices has also become important for OMCs now as the recent steel excise duty hike without resultant increase in petrol and fiscal prices, has substantially brought down its marketing margins from record high level of ₹12-18 per litre. If it is unable to raise prices when global market is rising, it would start incurring losses that will get steeper as product demand has also fallen by over 50 per cent last month amid nationwide lockdown.