Petrol, diesel prices may be gradually increased further, say sources

Fuel price hike: Petrol and diesel prices that have been increased twice within a span of week, might be increased further. However, this increase will be gradual, said sources to Business Today TV. 

Sources said that further price hikes have not been ruled out because oil companies need to recover the losses of the past 75 days. Average loss of oil companies 

On Monday, Sujata Sharma, Joint Secretary in the Ministry of Petroleum and Natural Gas, stated that oil companies were incurring about ₹750 crore loss a day. However, the May 15 hike had cut losses by a fourth, she said.

Meanwhile, an Indian Oil Corporation (IOC) official told Informist that the reason behind increasing fuel prices gradually was to limit the rise in inflation. The official said that the oil companies were trying to protect consumers as much as possible. 

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The official also said that they don’t see a reduction in fuel demand due to price hike, and also that there is no quantum of price increase that has been considered.

Petrol and diesel prices were raised by about 90 paise per litre on Tuesday, marking the second increase in less than a week after state-run oil firms ended a nearly four-year freeze on revisions. 

The fresh hike came days after fuel prices were raised by ₹3 per litre on Friday for the first time in more than four years. That move followed a sharp rise in global crude prices after the Iran war and allowed state-run fuel retailers to pass on part of their mounting losses after keeping rates unchanged for months through key state elections.

Rates vary from state to state because of differences in value-added tax. On May 15, compressed natural gas prices were also raised by ₹2 per kg in cities including Delhi and Mumbai. On Sunday, CNG prices were increased again by ₹1 per kg.

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Global crude prices have surged by more than 50 per cent since US-Israeli strikes on Iran on February 28 and Tehran's retaliation, which disrupted flows through the Strait of Hormuz, a key route for global oil shipments.

Despite the surge in crude prices, retail fuel rates were kept frozen as part of what the government said was an effort to shield price-sensitive consumers from higher global energy costs. Opposition parties, however, saw political motives behind the move as key states went to the polls.

The ₹3 per litre increase on Friday came after the completion of elections and after the ruling Bharatiya Janata Party expanded its influence by winning three of five states, including West Bengal. Even then, the increase covered only about a fifth of the hike needed to bring rates in line with costs, with Tuesday's revision adding to the rise in fuel prices.