Indian Oil justifies petrol price hike

The Indian Oil Corporation, which accounts for 50% of India’s petrol and diesel sales, has justified its recent increase in petrol prices, blaming the ever-rising international crude prices. It said, despite increasing petrol prices, it is losing Rs 159 Crore per day on the sales of other fuels like Diesel, LPG and Kerosene.

“With the persistent rising trend in the international oil prices, average prices of the Indian crude basket have gone up from $87.83/bbl during the earlier petrol price revision in December to the current level of $92.31/bbl amounting to an increase of $4.48/bbl. Average global prices of petrol during the same period have gone through an even higher increase of $5.17/bbl, rising from a level of $95.30/bbl to $100.47/bbl,” it said in a statement. “The current increase in the retail selling price (RSP) of Petrol was absolutely warranted and necessitated in the context of the above scenario,” it added.

It added that ideally, it should have increased petrol prices by Rs 3.72 per litre, but chose “to soften the impact on the customer” by increasing it by Rs 2.50 per litre only and absorbing a loss of Rs 1.22 per litre. “Even during the previous revision of the price of petrol with effect from 16th Dec’10, as against the required increase of Rs.4.90/Lt. in the price at New Delhi, the actual increase was confined to Rs.2.96/Lt,” it said.

Owing to the substantial increase in oil prices, the Oil Marketing Companies (OMCs) are continuing to incur huge amounts of under-realisations on the sales of other sensitive petroleum products — diesel, kerosene(PDS) and LPG(Domestic), it added. “Based on the current price levels in the international oil market, the retail selling prices (inclusive of the tax elements) of diesel, kerosene(PDS) and LPG(Domestic) should have been higher by Rs.7.65 per litre, Rs.19.60 per litre and Rs.366.28 per cylinder,” it pointed out.

It is expected to lose Rs.40,600 Crore during the current financial year, it said.

Petrol and diesel sales result in huge losses to public sector companies due to the high taxes charged by the government, as well as a capped policy regime.