Petrol and diesel prices jump by ₹2.40 a litre in four days

NEW DELHI: Petrol and diesel have become costlier by ₹2.40 per litre in just four days as state-run oil companies raised their rates by 80 paise a litre for the third time since March 22 when they ended the 139-day pause on the daily pricing mechanism.

Petrol prices surged to ₹97.81 a litre in Delhi on Friday, a 2.51% jump since March 22, while diesel rose to ₹89.07 a litre, a 2.8% spike in the same period. Companies raised fuel rates on Friday even as international oil prices softened the previous day, with benchmark Brent losing 2.1% to close at $119.03 a barrel yesterday. State-run fuel retailers say they align domestic retail prices daily with their respective benchmarks of the previous day.

On the Friday opening, Brent fell further by 0.12% to $118.88 a barrel. One official and a company executive, however, said the retail prices of fuel in India may continue to rise in a calibrated manner to recover past revenue losses, as daily changes in fuel rates were frozen for almost four-and-a-half months since November 3 last year for political reasons.

The decision of state-run oil marketing companies (OMCs) to start increasing fuel rates came as a big relief to private fuel retailers – Shell, Nayara Energy and Reliance-BP – as they were on the verge of shutting down their pumps because dominant public sector players continued selling auto fuels at huge revenue losses, the two persons mentioned above said requesting anonymity.

Public sector retailers Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd, and Hindustan Petroleum Corporation Ltd enjoy a monopoly in the domestic market. They operate nearly 90% of 81,699 fuel pumps across the country. The three firms on Tuesday lifted the freeze on daily change in fuel rates after assembly elections in five states concluded with the results on March 10.

IOC is the largest fuel retailer in the country and fuel prices at its pump in Delhi are the national benchmark. Other state-run firms keep their rates marginally different to avoid anti-competitive laws. Fuel rates vary from place to place because of variations in state-specific value-added tax (VAT) and other levies such as transportation charges.

DK Srivastava, chief policy advisor at EY India, said the hikes in petrol, diesel and cooking gas (LPG) rates was unavoidable and they may stoke inflation. “The ongoing pressure on the Indian crude basket due to the global developments will have adverse growth and inflation effects. Our estimates for FY23 suggest that if the price of the Indian crude basket increases by US$25/bbl, with reference to a baseline of US$75/bbl, growth may fall by about 70 basis points and CPI inflation may increase by 100 basis points.”

On Tuesday, along with the first hike in petrol and diesel rates, the companies also raised cooking gas prices by ₹50 per cylinder to ₹949.50 per refill. The price of cooking gas was last revised on October 6, 2021.

“The RBI Professional Forecaster’s Survey projected a CPI inflation range of 4.4-6% for FY23. Given the recent CPI inflation trends, the likelihood of reaching the upper level of this range seemed strong even before the current global crisis. With an additional increase of 100 basis points, consumers and industrial users may experience an impact to their existing budgets and cost estimates, unless the central and state governments absorb this pressure by reducing excise duty and VAT on petroleum products,” Srivastava added.