After the government raised the price of diesel and capped the subsidy on cooking gas, the oil marketing companies (OMCs) have another reason to cheer. The rupee’s sharp recovery will bring down their losses on every litre of diesel sale by around 10 per cent in the first fortnight of October.
Also, in a relief to airlines, the price of aviation turbine fuel (ATF) is likely to come down by two per cent after five increases. OMCs’ margins on petrol are expected to rise to around Rs 1.50 per litre from the present Rs 1.
The rupee’s exchange rate has averaged around 53.62 in the second fortnight of September, compared to 55.47 in the first. Over the past year, prices of petroleum products were driven up, more on a weakening rupee than an increase in international prices. However, with the unleashing of reforms in petroleum and the rules on foreign direct investment in retailing and aviation, a reverse trend has begun for the rupee.
The OMCs — Indian Oil, Bharat Petroleum and Hindustan Petroleum — follow an international fortnightly price (in dollars) to determine the domestic desired price (in rupees). It is estimated that every rise of the rupee by 1 against dollar decreases the underrecovery of OMCs on the sale of diesel, PDS kerosene and domestic cooking gas by Rs 8,810 crore a year. This year’s underrecovery projection of Rs 167,000 crore on three regulated products (diesel, kerosene and domestic LPG), based on data of September’s first fortnight, will come down accordingly. On September 13, the government raised diesel by Rs 5 a litre and decided to limit sale of subsidised cooking gas to six cylinders a year for a consumer, thereby bringing down annual petroleum underrecovery by Rs 20,300 crore, to Rs 167,000 crore.
The underrecovery on diesel in the current fortnight is Rs 13.86 per litre and is expected to come down by Rs 1.50 per litre, said an oil company official. The twin impact of a weakening rupee and firm international prices had driven the diesel underrecovery from Rs 9.95 a litre in the second half of July to a record Rs 17.05 a litre in the first fortnight of September. It came down to Rs 13.86 a litre in the second fortnight, after the Rs 5 price rise. Diesel alone accounts for around 60 per cent of annual oil underrecovery of the three companies. On petrol, a deregulated product, the margins are, as mentioned earlier, expected to improve from Rs 1 to Rs 1.50 per litre.
| DROP-BY-DROP | ||
| Sept 16-30,’12 | Oct 1-15,’12 | |
| INR vs USD* | 55.47 | 53.62 approx |
| Loss on diesel (Rs /litre) | 13.86 | 12.36 |
| Margin on petrol (Rs /litre) | 1.00 | 1.50 |
| ATF price in Delhi (Rs /kilolitre) | 73,710.69 | 72,210.69 |
| *Exchange rates are for the previous fortnight; October figures are calculated based on trend | ||
ATF is currently at a record high. In Delhi, it is priced at Rs 73,710.69 per kl, up a whopping 20 per cent since July. A decline of around Rs 1,500 a kl is expected in ATF. The rise in ATF prices, which constitute about 40 per cent of an airline’s operating cost, has been exerting continuous pressure on cash-strapped domestic carriers. The impact of every increase is compounded by a resultant rise in the ad valorem state tax on the fuel.
