Effective Monday, the oil companies have been allowed to pass on the four per cent increase in railway freight on to consumers for controlled petroleum products, namely motor spirit, aviation turbine fuel (ATF) high speed diesel (HSD), liquefied petroleum gas (LPG) and superior kerosene oil (SKO).

Consequently, the retail price of motor spirit increases by one paisa per litre and diesel from nil to six paisa per litre. The retail price of LPG goes up from nil to 20 paise per litre depending on the location of the marketing area from the refinery and ATF costs airlines two paisa more per litre.

Oil companies began passing on the burden of rail freight on to industrial customers last year for petroleum products in the free market, like naphtha and furnace oil. The OCC, however,continued to swallow the freight element in products still within the administered price regime.

The Railways increased freight from April 1 as usual, but the OCC only notified oil companies that they were allowed to pass on the freight burden to customers 20 days later. Since oil companies have no intimation on how to pay for the added cost of transporting POL (petroleum and oil lubricants) by rail during the intervening 19 days, it is assumed that the oil pool would pick up the tabs.

Considering that 2.9 lakh kilo litres of petroleum products are consumed per day and controlled products comprise nearly 65 per cent of the total, the 19-day bill for an average hike of Re 50 per kilo litre will not pinch OCC too hard. Consumers are not expected to feel the pinch of a few paise per litre either.

The freight element was built into the 3.5 per cent diesel price hike announced by the petroleum ministry on Monday and worked out to less than six paise out of the 34 paise to 39 paise increase in the retailprice of diesel. In the capital diesel costs Rs 10.28 a litre, compared to Rs 9.94 a litre before.

The price of motor spirit increases by one paise in Delhi to Rs 23.81 a litre, but does not go up at metropolises where refineries are located like Chennai, Mumbai and Calcutta. Oil companies have begun to charge dealers an extra paise per litre of kerosene, but domestic user may not have to pay more since the public distribution system (PDS) is controlled by the state governments, who may continue the subsidised price.

Dealers have to pay Rs 2.53 a litre for superior kerosene oil, compared to Rs 2.52 a litre before, however, to compensate for the four per cent increase in rail freight.

Cooking gas will cost the same in Mumbai and Chennai, where oil refineries are located, but will be 20 paise dearer in Delhi. Oil marketing companies in Calcutta, which procure their LPG from the Kalyani bottling plant, will also have to add on some amount of freight to the prevailing (subsidised) LPG price of Rs 146 acylinder.