Petrol to turn negative for OMCs, diesel losses to rise

Oil marketing companies to lose 10 paise on petrol and Rs 6 per litre on diesel from next month.

Oil marketers will lose their current retail margin of 40 paise on petrol while the loss on diesel is expected to increase by a fifth to Rs 6 per litre from next month. The price of aviation turbine fuel (ATF) is expected to increase by two per cent from next month.

Industry officials said petrol was expected to have an under-recovery of 50 paise per litre that would wipe off the current margins of 40 paise. “Petrol will have a marginal loss of 10 paise from next month in tune with the international trend,” said an industry executive. Petrol, a decontrolled product, will slip into negative territory after a month.

On diesel, a product still regulated by the government, the oil marketers — Indian Oil, Bharat Petroleum and Hindustan Petroleum — could see their under-recovery swell to about Rs 6 a litre from Rs 5 now.

These companies, who purchase crude oil at market rate, are required to sell diesel, kerosene and liquefied petroleum gas (LPG) at government-subsidised prices, resulting in losses.

Price of the Indian basket of crude oil, that averaged $111.26 per barrel in the first fortnight of the month, has averaged $113.81 so far in the current fortnight, up over two per cent.

While it is not clear whether the oil marketers will increase prices of petrol and diesel, they will certainly pass on the increase in ATF, a decontrolled product. ATF prices had increased marginally earlier this month to Rs 56,324.79 per kilo litre.

Prices of ATF, that account for 40 per cent of the operating cost for airlines, are already 40 per cent high compared to last year’s corresponding price.

While the losses of oil industry will increase from next month, the situation is still better compared to most of the first quarter. Prior to June 24 when the government increased price of diesel and affected changes in duties of both diesel and petrol, the oil companies lost Rs 14 on diesel and Rs 1 on petrol.

On June 24, the price of diesel was increased by Rs 3 while its excise duty was cut by Rs 2.6 to Rs 2 per litre. The five per cent customs duty on crude was removed and a corresponding decrease in import duty of diesel and petrol was made.