Indian Oil Corp cuts branded diesel prices

Petroleum companies may be dithering over reducing retail fuel prices across the board, but it is not stopping them from lowering branded fuel prices.

While Indian Oil Corporation (IOC), the country's largest oil marketing company (OMC), has quietly lowered the price of XtraMile, its branded diesel, across the country, the other two state-owned firms — Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) — are expected to follow suit over the next few days. IndianOil has lowered the price of XtraMile by Rs 1.25 to Rs 41.18 a litre in Mumbai from Saturday. BPCL and HPCL spokespersons said their boards were yet to consider price cuts.

IndianOil executives also indicated that over the next few days the company might lower the price of its branded petrol, Xtra Premium, by Re 1 to around Rs 58 a litre in Mumbai.

Oil marketing companies, which were forced to sell petroleum products at a loss when international crude oil prices crossed $70 a barrel, have not lowered the retail price of petrol and diesel, though they are making profits now. In fact, branded petrol and diesel were the first products, on which oil companies started registering profits once crude oil prices were back in the double-digit zone.

On Friday, the Indian crude oil basket touched its lowest level in three years, when it hit $43.82 a barrel.

The Indian basket was at an all-time high of $142.04 a barrel in early July.

In January, IndianOil had increased prices of its branded fuels, Xtra Premium (petrol) and Xtra Mile (diesel), by 20 paise and 10 paise a litre, respectively. About a third of the fuel sold by oil marketing companies comes under the category of premium branded fuels, which are high-performance auto fuel enriched with additives, offering better mileage and superior engine performance. At present, branded-fuel pricing is outside the purview of the government control.

While international crude oil prices have dropped, the government is not allowing state-run companies to lower prices as it wants to reduce the extent of oil bonds it issues. The oil bonds, which usually have a seven-year tenure, were devised to keep oil subsidies off the government's balance sheet since only the interest cost is budgeted for till maturity.