With the Indian Rupee hitting new lows in the recent times and fuel prices in India not been revised for past 5 months of so, the oil companies are worried about their under-recoveries which as per some media reports are as much as Rs. 7+ per litre of petrol in India. The prices of the crude oil in the international markets have not risen significantly in the past few months, but the exchange rate of Indian Rupee to Dollar has softened considerably with one US dollar worth Rs. 54+ as on 17th May, it is causing a lot of overheads in terms of the payments India oil companies make for their imports of crude.
As per the media sources and industry expectation, June 2012 may see a price hike in petrol as June month is the most likely month for major price hikes in petroleum products as per the past trends. As on 17th May 2012, the normal unleaded petrol in New Delhi is retailed at Rs. 65.64 per litre and it is expected that the price will be hiked by about Rs. 8 per litre, which maybe in one go or in two steps which will make the petrol price approximately Rs. 73 per litre in New Delhi and it is usually higher in other metro cities in India.
There has been talks going on between the Public sector oil companies which are IOCL, BPCL and HPCL with the Petroleum ministry and Finance ministry. The prices on the petrol are deregulated which means that the prices can be revised by the oil companies as the input costs increase (mainly the prices of international crude oil), but still these prices are usually increased after consultation between the Govt. and the oil companies. The Govt. can’t stop the prices to increase for longer times as this will make the losses of these Public sector companies too high.
These public sector oil companies have appealed to the Govt. to decrease the taxes or facilitate some sort of compensation to the oil companies for their under recoveries, but the same seems unlikely as the Govt. is already not in a very fit financial state as of now. Some of the other alternatives with the Govt. is to increase the prices of other petroleum products like Diesel, Kerosene, Domestic LPG etc. to ease the burden on the oil companies, but the same also has much less chances as the allied groups of the Govt. get quite furious over the same which creates political problems for the government. We are keeping a close eye on the situation and will let you know the latest updates on the petrol prices in India. Stay tuned for more, do check out our analysis on Why Diesel Costs So Much Lesser Than Petrol in India.