Oil companies’ retail margin on petrol has increased to nearly Rs 5 per litre, as global prices continued to fall this fortnight as well. The next price cut, expected later this week, could be nearly Rs 5 (including taxes), which would take it close to the level before the steep rise of Rs 6.28 a litre (Rs 7.54 per litre here) last month.
The three oil marketing companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — review petrol prices on a fortnightly basis, in line with the average international price. They skipped a review and cut on June 16. “When price was cut by Rs 2.02 on June 2, it was done based on the international average price of $115.81 per barrel against $124.42 in the fortnight when the price was increased by Rs 7.54. The average during the current fortnight so far is $99.75,” said an oil company official.
The dollar-rupee exchange rate has fallen from Rs 54.96 in the second fortnight of May (based on which the price was cut by Rs 2.02 a litre on June 2) to Rs 56.09 so far in the current fortnight.
A dollar decline in the global petrol price leaves scope for a Rs 0.34 cut in the per-litre petrol price; if the dollar strengthens by a rupee, it has a reverse impact of Rs 0.74 a litre on petrol.
The impact of a drop in the international petrol price from $115.81 to $99.75 is Rs 5.46 per litre, much higher than the negative impact of Rs 0.83 on account of the weakening of the rupee from Rs 54.96 to Rs 56.09, explained the official. If this trend continues till month-end, a price reduction of about Rs 4 (excluding taxes) is likely. This may take prices almost to the level before the steep rise of last month.
Crude oil prices are also on a declining trend. On Thursday, Brent crude oil touched an 18-month low of $91 per barrel. The Indian basket of crude also touched $91.17 per barrel on Friday, the lowest point since April last year.
When asked about the petrol price cut, minister Jaipal Reddy said on Friday that the oil companies were watching the volatile situation and would take a decision soon. On May 23, oil companies raised petrol prices by a record Rs 6.28 per litre (Rs 7.54, including taxes, in Delhi). This was followed by a sharp attack and criticism from key allies in the ruling coalition like the Trinamool Congress and DMK, and from major opposition parties.
