New Delhi: The Modi government hiked fuel prices Monday for the fourth time in the past two weeks. Petrol became costlier by Rs 2.61 per litre and diesel by Rs 2.71 per litre, adding to inflationary pressures on households and businesses.
With the latest revision, the cumulative increase in petrol and diesel prices has reached nearly Rs 7.5 per litre. In Delhi, petrol will now retail at Rs 102.12 per litre, while diesel will cost Rs 95.20 per litre.According to sector experts, the latest fuel price hike will only partly offset the losses incurred by state-run fuel retailers, indicating that further increases in petrol and diesel prices may be needed in the coming weeks.
Investment Information and Credit Rating Agency (ICRA) estimates that at crude oil prices of $120-125 per barrel, and based on average crack spreads (difference between the price of raw crude oil and the petroleum products extracted from it) seen over the last decade, Oil Marketing Companies (OMCs) are still losing around Rs 700-800 crore every day on the sale of petrol, diesel and domestic LPG even after the latest fuel price increase.According to Prashant Vasisht, senior vice president and co-group head, corporate ratings at ICRA, the latest fuel price increase has only partly addressed the losses incurred by oil marketing companies.“Despite the latest hike in retail prices of automobile fuels, the under-recoveries of oil marketing companies remain stubbornly high due to increasing losses in domestic LPG sales and the high premium to the crude marker,” Vasisht told ThePrint.“This high level of under-recoveries is unsustainable,” Vasisht said.Former finance secretary Subhash Garg said the latest increase was unlikely to be the last.“There is no escape from the fuel price increases. The fourth one takes it to nearly Rs 7.5 per litre. Still, large under-recoveries are left which will be covered by increasing prices over next few weeks to ensure OMCs do not get too much in the red,” he told ThePrint.Garg also warned that the fuel price hikes would push up inflation.“The big consequence of the hefty price increases would be reflected in retail inflation rising significantly now both on account of direct impact of fuel price increase as well as indirect impact on prices of everything else,” he said, adding that workers without inflation-linked wage adjustments would be hit the hardest.The increase is expected to further strain household budgets by raising transportation and logistics costs, leading to higher prices of essential goods and services.The government has attributed the hikes to mounting losses suffered by public sector OMCs, including Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum. Last week, Petroleum Ministry Joint Secretary Sujata Sharma said the OMCs were collectively incurring losses of around Rs 750 crore every day as international crude oil prices remained above $100 per barrel.Retail fuel prices had remained largely frozen since April 2022 despite elevated crude oil prices driven by the Russia-Ukraine conflict and supply concerns. The recent increases are aimed at helping OMCs recover a portion of the under-recoveries accumulated during this period.The latest hike comes even as Brent crude fell below $100 per barrel Monday for the first time in May amid expectations of a positive outcome from renewed negotiations between the United States and Iran.Despite the decline in global oil prices, consumers are likely to face higher fuel costs in the coming weeks as OMCs continue efforts to recover past losses.Opposition attacks government
