• Source:JND

Petrol, Diesel Price Hike Impact: The four rounds of petrol and diesel price hikes have trimmed the losses state-owned oil firms were incurring from selling fuel below cost to close to Rs 600 crore per day from above Rs 1,000 crore per day before May 15, the day the first price hike was announced, Sujata Sharma, Joint Secretary in the Ministry of Petroleum and Natural Gas, said on Monday.

Earlier, in the morning, Petrol and diesel prices were raised by Rs 2.61-2.71 per litre-- a fourth increase in less than two weeks. With the latest revision, cumulative increases in petrol and diesel prices have nearly reached Rs 7.5 per litre since prices were first increased on May 15, after an over 70-day freeze, despite higher crude prices due to the Middle East crisis.

The gradual hike in prices is part of a state-owned fuel retailer's continued effort to pass on rising international oil prices to consumers.

Price Hike Brings Losses Down

The losses on sale of petrol, diesel and domestic cooking gas LPG were about Rs 1,000 crore per day before the start of the May 15 cycle of price revision.

"It (losses) is slightly less than Rs 600 crore per day," Sharma said.

These losses include losses from domestic LPG sales. LPG sold to households is a subsidised product, and the government covers the difference between the cost and retail price. On the other hand, petrol and diesel are deregulated commodities whose prices are determined by the market.

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Loss of Rs 1.2 lakh crore due to price control for 74 days

Global crude oil prices remained elevated for most of the time since the war began on February 28. Despite the sharp increase in oil prices, retail prices of petrol and diesel were kept stable in India for 74 consecutive days. By the time the price hike was first announced, just after the results of the assembly elections in five states, the cumulative losses of the three state-owned oil companies had exceeded Rs 1.2 lakh crore.

Will There Be More Price Hikes Ahead?

Considering the scenario, the recent price hike has reduced oil companies' daily losses, but not completely eliminated them. According to analysts, every 50 paise increase in fuel marketing margins improves oil companies' earnings before interest, taxes, and depreciation by approximately 7 to 11 per cent. This is why even a small increase in fuel prices significantly boosts companies' profits.

According to industry estimates, when crude oil prices were at their peak, these companies were collectively incurring losses of approximately Rs 1,600 crore per day.

Therefore, a few more rounds of price hikes would not be a surprising move.

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Fuel Price Hike

Despite these hikes in retail oil prices, the country's three state-owned oil marketing companies—Indian Oil Corporation, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited—are still grappling with significant losses due to elevated oil prices in the international market and a decline in the rupee against the US dollar.


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