Will Friday see the public sector oil marketing companies (OMCs) reducing the retail price of petrol for the second time this month?
Logically yes, as both international crude oil and product prices have softened. But, a lot will also depend on how the currency has behaved, industry officials said.
While expectations were running high, oil industry officials maintained that, “A final call will be taken on Friday.” The OMCs review petrol prices on a fortnightly basis.
The best the consumer can expect is a Re 1 price cut given the prevailing conditions, say industry officials.
The crude oil prices have dropped from an average of $110.20 a barrel in May to $98.36 a barrel in the 13 days of June. The product price (petrol price Singapore FOB) has come down from $115 a barrel when the first price cut happened on June 2. Today it was around $108-$109 a barrel.
On June 2, oil companies had reduced the base price of petrol by Rs 1.68 a litre (excluding VAT/sales tax). The decrease varied from State to State depending upon the VAT/Sales Tax rates.
In Delhi, the price cut was Rs 2.02 a litre. This cut had come after a very steep hike of Rs 6.28 a litre (excluding VAT/Sales Tax) on May 23.
The companies – Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation – were not incurring any loss after the hike. But, the advantage of drop in oil and product prices is, to large extent, offset by rupee depreciation.
Though petrol has been a deregulated product since June 26, 2010, an artificial Government control continues. The OMCs have incurred losses of Rs 2,300 crore in 2010-11 and Rs 4,900 crore in 2011-12 and Rs 2,300 crore in the current financial year (till May 23, 2012).
Besides, because of the highly subsidised sale of diesel, domestic LPG and PDS kerosene, the OMCs are under huge financial strain.
Last fiscal, petrol prices were revised five times – increased thrice and reduced twice. This fiscal it has been revised twice – increased in May, reduced in June.