Kotak sees oil under-recoveries rising to Rs 1.3 tln in FY14
However, the under-recoveries could decline to Rs 0.8 trillion if diesel prices are increased at Rs 1 per litre every month as being proposed, it said.
"We have increased our estimate of gross under-recoveries on diesel, kerosene and LPG to Rs 1.3 trillion for FY14 versus our previous estimate of Rs 1 trillion, assuming higher crude oil prices, weaker exchange rates and no further increase in retail prices of regulated fuels," senior executive director of the firm Sanjeev Prasad said in a note.
The firm has assumed an increase of USD 5 per barrel to USD 105 and exchange rate at Rs 54 against the US dollar to arrive at the estimated increase in under-recoveries for FY14, it said.
"However, if we were to assume a monthly increase of Re 1 per litre in retail price of diesel for FY14 along with roll-back of cap on LPG cylinders to nine, the under-recoveries will decline meaningfully to Rs 0.8 trillion," he said.
The Petroleum Ministry is considering a gradual increase in diesel prices of less than Re 1 per litre on a monthly basis over the next 15 months in a bid to eventually deregulate retail prices, based on the recommendations of Kelkar committee.
Progressive increase in diesel prices, if implemented, may lead to