Petrol, diesel prices hiked by 80 paise per litre for 2nd day in a row

New Delhi: Petrol and diesel prices on Wednesday were hiked by 80 paise a litre each for the second day in a row since the ending of an over four-and-half month election-related hiatus.

Petrol in Delhi will now cost Rs 97.01 per litre as against Rs 96.21 previously while the diesel rate has gone up from Rs 87.47 per litre to Rs 88.27, according to a price notification of state fuel retailers.

In Mumbai, petrol price has been increased by 85 paise to Rs 111.67 while in Chennai prices went up by 75 paise to Rs 102.91. In Kolkata, rates increased to Rs 106.34 from Rs 105.51.

The diesel price hike in Mumbai was 85 paise per litre.

Rates differ from state to state depending on the incidence of local taxes.

A record 137-day hiatus in rate revision ended on March 22 with an 80 paise per litre increase in rates.

Prices had been on a freeze since November 4 ahead of the assembly elections in states like Uttar Pradesh and Punjab — a period during which the cost of raw material (crude oil) soared by USD 30 per barrel.

The rate revision was expected soon after assembly elections ended on March 10 but it was put off.

Oil companies are now recouping the losses.

They “will need to raise diesel prices by Rs 13.1-24.9 per litre and Rs 10.6-22.3 a litre on gasoline (petrol) at an underlying crude price of USD 100-120 per barrel,” Kotak Institutional Equities said in a note.

If crude sustains around levels of USD 120, oil marketing companies will find it difficult to be able to return to a normative marketing margin without any support from the central government in the form of excise duty cuts, it said.

“Oil marketing companies holding back on retail price hikes following the conclusion of the elections was disappointing given the impact on margins, however, price hikes should provide some marginal respite if the trend sustains over the coming days,” it added.

India is 85 per cent dependent on imports to meet its oil needs.

Dipti Deshpande, Principal Economist at CRISIL Ltd, said retail fuel prices of petrol and diesel have been kept unchanged since November 2021, whereas global crude oil prices rose by close to USD 30 per barrel during this period. “The pass through of rising crude oil prices to domestic fuel prices is, therefore, inevitable, and further hikes can also be expected.”

Hetal Gandhi, Director at CRISIL Research, said, “given that the price of crude oil has averaged USD 100 per barrel in the current quarter, a full pass through would require a Rs 9-12 per litre increase in the retail prices of petrol and diesel. And if the average crude oil price rises to USD 110-120, the hike required would be Rs 15-20 per litre.”

Demand for transportation fuels, however, is likely to remain largely inelastic, supported by the ongoing recovery in economic activity, he said.