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Petroleum industry

Falling Global Crude Prices May Not Avert Diesel and LPG Hike

Strategic Insights

— 1 min read

The decline in global crude prices has reduced the losses of state-owned oil companies, but a Rs 4 per litre increase in diesel prices and a Rs 20-25 per cylinder hike in LPG rates appears imminent. The oil companies' losses on diesel, domestic LPG, and kerosene sales have decreased from Rs 495 crore per day to Rs 479 crore during the second half of May. Despite this, the projected revenue loss for Indian Oil Corp (IOC), Hindustan Petroleum (HPCL), and Bharat Petroleum (BPCL) for the full fiscal remains at Rs 170,676 crore, down from Rs 180,208 crore.

Key Takeaways:

  • The oil firms' losses on diesel sales have decreased from Rs 16.17 per litre to Rs 14.66 per litre.
  • The desired increase in diesel price to make it at par with international rates will be Rs 16.49 per litre in Delhi after adding local sales tax or VAT.
  • State-run oil firms lose Rs 29.69 a litre on kerosene and Rs 329.73 per 14.2-kg domestic LPG cylinder.
  • The government had issued a notification freeing petrol prices in June last year, and diesel pricing is expected to be freed in due course.
  • The Empowered Group of Ministers (EGoM) under Finance Minister Pranab Mukherjee will meet soon to decide on raising diesel, domestic LPG, and possibly kerosene prices.
  • The oil firms had not revised rates since January due to the assembly elections in five crucial states, and the recent hike in petrol price was less than half of the desired increase.

Statistics:

  • The oil companies' losses on diesel sales decreased from Rs 495 crore per day to Rs 479 crore in the second half of May 2011.
  • The projected revenue loss for the full fiscal is reduced to Rs 170,676 crore from Rs 180,208 crore for IOC, HPCL, and BPCL.
  • The desired increase in diesel price to make it at par with international rates is Rs 16.49 per litre in Delhi, including local sales tax or VAT.
  • The oil firms lose Rs 29.69 per litre on kerosene and Rs 329.73 per 14.2-kg domestic LPG cylinder.

Sources:

  • (Press Trust of India, May 16, 2011)
  • (Various quotes from the article, attributed to industry officials and government ministers)

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