Deregulation Of Oil Sector
If crude crosses $75/barrel, the Govt would get into the picture and control the prices once again. Well, at that time, on 29th May to be precise, there was no real fear of that $75/barrel coming in too soon. But now, this is the stark reality staring at our faces. Crude continues to flirt with $70/barrel levels and the threat is very real of it reaching the $75 threshold soon. So then that makes us wonder about all the hullabaloo and celebrations on
When things just about seem to be improving, something comes up on the horizon which threatens to remove the small trace of smile coming on the face of the economy. If the April IIP numbers had managed to bring in cheer, the rising crude price and the delay in monsoon shows those days of low inflation might as well be over. Prices of petrol and diesel are expected to be hiked any time soon.
But one has to be thankful that this deregulation did not happen because if it had happened, once crude had crossed $70, price of petrol would have been hiked by Rs.6.50 per litre and that of diesel at Rs.3.25 per litre.
Infact, the private sector OMC – Essar has already hiked its price. It has raised diesel prices by Rs1-2 a litre and petrol prices by Rs1-2.5 per litre depending on location of the fuel station. RIL which had recently started selling diesel at its 65 operational outlets, has not yet taken a final decision. This scenario of rising crude is a no-win situation for the private sector players. They cannot afford to sell at lower prices and if they hike prices, they lose their customers to the PSUs.
About our PSU OMNCs?
After having made profits for the past seven months, once again HPCL, BPCL and Indian Oil have started making losses on the diesel and petrol which they are selling. The figure which has come in is that these OMCs stand to lose around Rs.38,700 crore in revenue this fiscal. IOC, BPCL and HPCL are selling diesel at a loss of Rs2.96 a litre from Tuesday. And the loss in petrol is higher – Rs.6.08 per litre of petrol from Rs3.68 a litre in the first half of June. So this means, these three OMCs are losing Rs.135 crore per day on sale of petrol, diesel, domestic LPG and kerosene.
OMCs have already hiked the price of aviation fuel. Effective
Is a fuel price hike imminent?
The Govt has categorically given a firm “No” and has stated that prices will be hiked, if and only if, the average price of crude crosses $70/barrel. The average price of crude oil this quarter is around $57 a barrel, so that clearly means that there is no case for a fuel hike right now. This is good news for us but for the OMC, it means that their losses would mount further.