Petrol likely to turn dearer this week

After two consecutive price cuts, petrol is expected to become costlier by up to Rs 1 a litre later this week, if the government-owned oil marketing companies decide to pass on the loss caused by the twin impact of rupee weakening and firm international prices. By contrast, aviation turbine fuel price is likely to come down by around 1.2 per cent or Rs 800 a kilo litre even as losses on diesel will come down by around Rs 0.80 a litre from Rs 12.03 now.

Oil industry executives, however, were not sure that the increase in petrol price could be passed on to the consumer before December 21 when Parliament session comes to a close.

Another senior executive advocated passing on the hike as the last price cut of Rs 0.78 paise earlier this month also happened while Parliament was in session. “If we can cut price when Parliament is in session, there should be no issue about passing an increase during the session,” he said.

Based on this fortnight’s prices, oil companies will be losing around Rs 0.80 a litre on petrol, exclusive of the tax. The loss is on account of firming international prices and weakening of the rupee.

Oil marketing companies review petrol prices every fortnight. They calculate the prices of petrol based on its trade parity (80 per cent import price weight and 20 per cent export price weight) for the previous fortnight.

Petrol prices have moved up by 37 per cent since decontrol to Rs 65.64 per litre in Delhi. During the same period, diesel prices, which is still regulated, has increased by 7.37 per cent to Rs 40.91 per litre. The gap between petrol and diesel prices that used to be 25.80 per cent prior to decontrol has now widened to over 60 per cent.

Consequently, petrol consumption has taken a beating. Against a double digit growth in recent years, petrol is growing at 5.3 per cent while diesel is growing at 6.2 per cent. This is also one of the rare years when diesel is growing at a higher rate than petrol. Data for past 15 years (with an exception of 1996-97 and 2004-05) show a higher growth rate for petrol.