Fuel price rise may continue in June but quantum may reduce
By Subhash NarayanNew Delhi, June 15 (IANS) Consumers are unlikely to get respite from the rising price of auto fuels — petrol and diesel as oil companies plan to cover their entire gap of around Rs 8 per litre on sale of the two petroleum products by raising retail prices daily for at least next two weeks.But the quantum of increase may fall from around 60 paise per litre, giving some respite to consumers in midst of several disruptions due to Covid-19 pandemic.After 83 days break since March 16, oil marketing companies have started raising petrol and diesel prices daily from June 7. In the nine days since then, petrol prices have risen by Rs 5 per litre while diesel prices have gone up by Rs 5.23 per litre. Petrol price increased by 48 paise and diesel by 59 paise per litre to Rs 76.26 and Rs 74.62 per litre respectively on Monday in the national capital.
Sources in public sector oil companies said that petroleum products may continue its daily upward movement till the end of the month or earlier but from now on the increase may be lesser by around 30-40 paise per litre. “Global oil prices have again fallen below $40 a barrel and product prices have also decreased marginally. If this holds, there could actually be a reduction in petrol and diesel prices from next month,” the official earlier said.As per a report from ICICI securities, while the current retail price hikes are encouraging, further price hike of Rs 5.5 per litre (7-8 per cent) is needed if net margin of oil marketing companies is to recover to Rs 1.19 per litre on July 1, 2020.
While prices have now gone up by over Rs 5 per litre, the projected fall in OMCs net marketing margin would need petrol and diesel prices to rise by another Rs 4-5 a litre to make margins again.The OMCs could also get support from global oil market where crude prices have dropped to below $40 a barrel now. If this sustains, there is a possibility that petrol and diesel prices may actually begin to fall from July.Net auto fuel marketing margins are back in the black at Rs 0.2 per litre from minus Rs 1.28 per litre on June 6, 2020 due to retail price hikes.
It has covered further ground after nine days of increase in auto fuel prices.Net marketing margin of OMCs slipped into the red to minus Rs 1.28 per litre during June 1-6, 2020 due to surge in refinery transfer price (RTP) by Rs 5.6-7.1 per litre from the low on May 1, 2020 and hike in excise duty by Rs 10-13 per litre, which was absorbed by OMCs.Net margin would be Rs 6.09 per litre in Q1FY21E if price hikes are made, but Rs 5.18 per litre if no further hikes are made. If price hikes are made, net margin may be Rs 2.17 per litre (down 2 per cent YoY) in FY21E assuming it at Rs 1.19 per litre in Q2-Q4.(Subhash Narayan can be contacted at [email protected])–IANSsn/skp/