Petrol price: Karnataka voting over, rate hikes restart; no relief for consumers likely
With the daily price revision of automotive fuels restarting on Monday after a 19-day hiatus due to Karnataka polls, petrol prices reached nearly five-year high while diesel prices hit a new all-time high in Delhi.
With the daily price revision of automotive fuels restarting on Monday after a 19-day hiatus due to Karnataka polls, petrol prices reached nearly five-year high while diesel prices hit a new all-time high in Delhi. State-owned oil PSUs hiked petrol prices by 17 paise a litre and that of diesel by 21 paise per litre.
As per the Indian Oil Corp website, petrol price in Mumbai rose to Rs 82.65 a litre on Monday, while diesel prices reached Rs 70.43. Similarly, in Delhi the petrol price touched Rs 74.80 a litre, while diesel prices stood at Rs 66.14. In other major cities, petrol prices increased by about 0.2% and diesel prices rose by 0.3%.
Analysts estimate the three OMCs - Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd - took a combined hit of over Rs 1,500-1,700 crore since the start of April, when the prices marginally higher despite a steep rise in international oil prices. The revisions were altogether stopped on April 25 due to polls in key southern state.
Industry experts now expect the OMCs to breathe a sigh of relief and try to recover losses by re-calibrating it with the international prices, although the rise is likely to be gradual.
With the US reimposing sanctions on Iran, global oil prices are unlikely to come down any time soon.
The daily pricing of fuel was enforced by the government in June last year to align with the international oil prices and currency volatility.
“The OMCs which sustained all the losses due to it, will now certainly try to recover their losses by increasing the oil prices” said Madan Sabnavis, chief economist at CARE Ratings.
The industry insiders say India has the history of “regulating” oil prices in the run up to election dates.
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In the past, marketing margins have turned negative in the run-up to state elections in 2015 and 2017, though crude prices then had not risen much as compared to the current surge.
With elections in Karnataka concluding, other states like Mizoram, Chhattisgarh, Madhya Pradesh and Rajasthan are next in line for state legislative assembly elections, before the country gets ready for general elections in 2019. Hence, the losses to the OMCs are likely to get repeated in the coming months, affecting their profitability, say analysts.
According to Anoop Bhatia, VP & Sector Head (Corporate Ratings) at rating agency ICRA said “It would take at least around two weeks of modest price hike by the OMCs for aligning retail fuel prices with the international level, even if crude oil prices do not increase from the current level. The recent trend of consistent depreciation in Indian rupee against US dollar, if continued, may further elongate the period or require sharp hikes to bring retail fuel prices at market-determined level” said Bhatia.
By Shahkar Abidi, DNA Money