Rapid price hikes since the beginning of last month have boosted state oil companies’ net marketing margin on petrol and diesel to nearly Rs 3 per litre, nearly six times the average margin in May.
Companies raised prices of petrol and diesel yet again on Tuesday, by 26-28 paise per litre. Fuel prices have been at record levels for months due to a combination of climbing oil prices in the international market, steep taxes and expanding marketing margins of oil companies.
Net marketing margin on auto fuels rose to Rs 2.98 per litre on Monday from an average of 48 paise in May, according to ICICI Securities. The average for the first 21 days of June is Rs 2.96.
Companies have raised fuel prices almost every alternate day since May 3 when the margin had plunged to minus 97 paise per litre. The price hike of Rs 7.1-7.5 per litre since May 3 has helped companies take their margin closer to the annual average of Rs 3.05 in 2020-21.
Analysts feel the government allows state oil companies to expand marketing margins to make up for weak refinery margins and to ensure high valuation for BPCL that’s being privatised. Net margin of Rs 2-2.5 a litre in the initial period of the current fiscal year “may be crucial for the government to realise a high price in BPCL privatisation,” ICICI Securities said in a note on Monday. Higher profits help state companies pay increased dividends to the government.
Traditionally, oil companies have enjoyed slim marketing margins. In the year 2019-20, it was Rs 2.22 per litre but for each of the four years between April 2014 and March 2018, it remained around Rs 1 per litre.
It would be hard for the government to permit inflated marketing margins while imposing steep taxes in the face of rapidly climbing oil prices. Higher fuel prices have triggered complaints from industries and retail consumers and are showing up in wider inflation.
Crude oil rose above $75 a barrel on Tuesday, the highest since April 2019, on a strong global fuel demand outlook. Bank of America expects prices to hit $100 per barrel as the lifting of lockdown restrictions would release a lot of pent up demand in the market while supply is expected to stay restricted.
Oil companies’ auto fuel marketing margin (Rs/litre)
Jan Feb March April May June*
1.1 2.3 0.4 0.7 0.48 2.96
*Until June 21, 2021.
Source: ICICI Securities
(Source: Economic Times)
Petrol price on a Roll, consumers spared big hike in diesel
June 25, 2021: Fuel prices increased again across the country on Thursday, adding more misery for the common man already grappling with rising food prices amid shrinking income. But in the latest round of fuel price hike, oil marketing companies have spared diesel users from a big spike while maintaining regular increase in the retail price of petrol.
On Thursday, the oil marketing companies (OMCs) raised the price of petrol by 26 paise per litre to Rs 97.76 a litre in Delhi but kept diesel price hike relatively lower at just 7 paise per litre that has raised its retail level at Rs 88.30 a litre in the national capital.
With the rise, petrol price has reached very close to hitting the century mark all across the country extending the scope of historic high prices that had already made the fuel rate cross the Rs 100 per litre mark in certain cities and towns of Maharashtra, Madhya Pradesh, Rajasthan, Telangana and Andhra Pradesh.
In the city of Mumbai, where petrol crossed Rs 100 a litre mark for the first time on May 29, the fuel price reached new high of Rs 103.88 per litre on Thursday. Diesel price also increased marginally in the city to reach Rs 95.80 a litre, the highest among metros.
Across the country as well petrol and diesel prices increased on Thursday but its retail prices varied depending on the level of local taxes in different states.
Petrol prices in three other metros apart from Mumbai have also reached closer to Rs 100 per litre mark and OMC officials said that if international oil prices continue to firm up, this mark could also be breached in other places by month end.
With Thursday’s price hike, fuel prices have now increased on 29 days and remained unchanged on 26 days since May 1. The 29 increases have raised petrol prices by Rs 7.37 per litre in Delhi. Similarly, diesel price has increased by Rs 7.57 per litre in the national capital.
With global crude prices also rising on a pick up demand and depleting inventories of world’s largest fuel guzzler – the US, retail prices of fuel in India are expected to firm up further in coming days. The benchmark Brent crude reached multi year high level of over $75 on ICE or Intercontinental Exchange.