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| Oil cos to lose Rs 40,000 cr if prices not raised: Citi | |
| Press Trust of India / New Delhi July 2, 2009, 18:06 IST | |
Making a case for further increase in petrol and diesel prices, financial firm Citi today said that oil companies may lose Rs 40,000 crore in revenues if the prices are not aligned with international rates.
"...Our oil analyst believes that the under-recoveries on cooking fuels would be Rs 27,400 crore, (and) Rs 40,000 crore if transport fuels are not adjusted any further," Citi said in a report.
Following a rise in the international price of crude oil and the increasing under-recovery of state-run Oil Marketing Companies (OMCs), the government yesterday increased the price of petrol by Rs 4 a litre and diesel by Rs 2 a litre.
The hike announced was short of Rs 5.82 a litre needed to align domestic petrol rates to international parity and Rs 3.62 per litre in case of diesel.
The government did not increase domestic LPG and kerosene rates despite state-run oil firms losing Rs 92.96 per cylinder and Rs 15.26 a litre respectively.
"Although this is still less than current international prices (petrol and diesel would need to be raised by an additional Rs 2.5/ltr)...The hike is positive, bodes well for the reform process and is a step towards fiscal consolidation," the report said.
Citi also said the cut in fuel prices would also lead to increase in inflation.
Given that petrol and diesel have a weight of 2.9 per cent in the WPI, the fuel price hike would have about 30 basis points impact on inflation, it said.
It expects inflation to cross 4 per cent by year end, adding that the Reserve Bank will reverse its easy money policy next year.
Inflation stayed negative for the third week in a row, at minus 1.3 per cent for the week ended June 20, even as prices of food like fruit and vegetables rose as compared to last year during the same period.
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