Retail prices Hiked! Auto fuels get costlier for second straight day

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Published: June 9, 2020 1:55 AM

Diesel is now priced at Rs 70.59/litre in the national capital and petrol at Rs 72.46/litre, as against Rs 69.39/litre and Rs 71.26/litre respectively on Saturday.

“No daily price change in the last two months is disappointing and our confidence in ‘deregulation’ has declined further,” analysts Nomura had said.“No daily price change in the last two months is disappointing and our confidence in ‘deregulation’ has declined further,” analysts Nomura had said.

Oil marketing companies raised retail fuel prices of auto fuels for the second day in a row on Monday, ending a month-long hiatus, to cope up with the gradual increase in global oil prices. Diesel is now priced at Rs 70.59/litre in the national capital and petrol at Rs 72.46/litre, as against Rs 69.39/litre and Rs 71.26/litre respectively on Saturday.

“No daily price change in the last two months is disappointing and our confidence in ‘deregulation’ has declined further,” analysts Nomura had said.

Petrol and diesel in Delhi remained unchanged from March 16 to May 4 while the price of the Indian basket of crude has fallen 23.5% to $23.38/barrel in the same period. Retail fuel prices had risen in Delhi on May 5 reflecting the hike in state VAT, and have remained unaltered since then. “In our view, the decision to not change prices may have been done at the insistence of the government, as the latter likely wanted to further increase excise duty,” Nomura noted.

The government has hiked excise on transportation fuel by Rs 10 per litre on petrol and Rs 13 per litre on diesel on May 5, after raising taxes by Rs 3 per litre for both petrol and diesel on March 14. The move is seen to fetch an additional Rs 1.42 lakh crore to the government in the remaining period of FY21.

Some state governments toed the line and increased the VAT/sales tax rates on the fuels.

In fact, to keep retail prices unchanged, the base prices of petrol and diesel charged to dealers had to be reduced by Rs 10/litre by OMCs to accommodate the Central government excise hike, taking a toll on their marketing margins. Such steep tax hikes by the government is seen to have taken away the headroom for further price hikes for OMCs to cushion them against rising global crude rates.

OMCs made high margins in the first two months of Q1FY21by keeping retail petrol and diesel prices unchanged amid global fall in oil prices. However, with gradual revival of global oil prices, stagnant retail prices raised the risks for OMCs. “If Brent remains near spot ($35), daily gross marketing margins (net of freight) could turn negative for both petrol and diesel (minus Rs 0.3-2.0/l) if retail selling prices remain unchanged,” analysts at Jefferies had cautioned.

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