Brace yourself: Sharp diesel, petrol price hikes coming

Anilesh S. Mahajan        Last Updated: September 6, 2013  | 17:46 IST
Sharp diesel, petrol price hikes coming

Get ready for the next jolt to your household budget: the prices of petroleum products will be revised shortly.

Petroleum Minister M Veerappa Moily might be looking the other way to on the probable revision of petroleum prices but the under-recoveries on these products are mounting at a rate that is alarming for oil marketing companies (OMCs).

The price of petrol is expected to rise by another Rs 4-5 for a litre and the diesel price could be corrected by Rs 5 for a litre, according to officials of OMCs. The prices of domestic LPG cylinder could be increased by another Rs 50.

If we trust the signals coming in from ministry as well as these OMCs, the decision to revise petroleum prices upwards will be taken after the Monsoon Session of Parliament, scheduled to end on Friday.

This price increase will be second in a week, triggered by the slide of Indian currency. The under-recovery on diesel prices has increased to Rs 12.12 a litre from Rs 9.03 in beginning of the year. This is despite the 50 paise per litre monthly increase since January. The under-recovery on diesel had fallen to Rs 3.73 a litre as of May 16 2013 due to a fall in crude oil prices.

But all the calculations have gone awry with the double-whammy of a rupee sliding against the dollar and the crude prices rising.

In the second fortnight of August, the average price of crude oil sourced in India climbed to $110.09 a barrel and exchange rate was Rs 64.91 to a dollar. The comparable crude price was $101.21 a barrel and exchange rate was Rs 54.32 to a dollar in the first fortnight of May. The rupee depreciated further late in August but has bounced back in the last three days to the Rs 65.3 to the dollar.

Analysts predict a sharp rise.

"The significant increase in under-recoveries in the past few months is likely to lead the government of India to effect a one-time increase in the price of diesel and subsidised LPG cylinders", says Abhinav Goel, Senior Director, India Ratings & Research.

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