Furnace oil, naphtha prices raised

Users feel the pinch as fuel rises 35% in 6 months.

Oil refineries have increased prices of furnace/fuel oil and naptha from this month. In the last six months, furnace oil prices have gone up by 35 per cent.

Naphtha prices have also gone up, thus putting pressure on the profit margins of manufacturing industries.

In the last two months, the crude oil prices have rallied from $79 a barrel to nearly $99 a barrel before softening to $88 a barrel. During this period, fuel oil prices have gone up from Rs 19,670 a tonne to Rs 23,330, an increase of 18 per cent. In June, fuel oil prices were ruling around Rs 17,270.

Similarly, the naptha prices have gone up by 18 per cent from Rs 31,190 a tonne in October to Rs 36,890 a tonne in December.

Public sector oil marketing companies are free to determine the prices of fuel oil, naphtha and other petrochemicals. Only petrol, diesel, kerosene and LPG prices are controlled by the government.

The increase in the prices of fuel oil and naphtha, important feedstocks for manufacturing industries, will have an impact on the margins of the industry.

The recent hike in prices will cause a Rs 4 per unit rise in the cost of power generation of a naptha-based power plants.

Fertiliser companies, which use naptha as a fuel for power generation, may see their per unit power cost rising from Rs 7-8 a unit to Rs 11-12. The fertiliser industry's power and fuel cost accounts for 14.5 per cent of the total cost.

Other energy-intensive industries such as cement, steel and fertiliser will also feel the heat of the price hike. Naphtha is widely used in the petrochemical, fertiliser and power industries.

"This price hike will also impact the long-term fuel choices of user industries, who will look for alternate fuel such as natural gas,'' said an analyst.