Diesel price nears all-time high as oil-marketing companies revive margins

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Published: June 17, 2020 2:30 AM

ICICI Securities pointed out that the net marketing margin of OMCs had slipped into the red at minus Rs 1.28/litre on June 6, and has surged to Rs 3.1/litre on Monday due to retail price hikes.

Retail prices of diesel in Delhi are soon seen to breach its all-time high of Rs 75.69/litre recorded on October 16, 2018.Retail prices of diesel in Delhi are soon seen to breach its all-time high of Rs 75.69/litre recorded on October 16, 2018.

Oil-marketing companies (OMCs) raised retail prices of auto fuels for the 10th day in a row to revive their marketing margins. Diesel, on Tuesday, cost Rs 75.19/litre in the national capital and petrol Rs 76.73/litre. Rates have been rising continuously since June 6, when diesel and petrol was priced Rs 69.39/litre and Rs 71.26/litre, respectively.

ICICI Securities pointed out that the net marketing margin of OMCs had slipped into the red at minus Rs 1.28/litre on June 6, and has surged to Rs 3.1/litre on Monday due to retail price hikes.

Retail prices of diesel in Delhi are soon seen to breach its all-time high of Rs 75.69/litre recorded on October 16, 2018. Petrol price in the national capital had climbed to the highest of Rs 84/litre on October 4, 2018.

Analysts at ICICI Securities said that a further retail price hike of Rs 2.4/litre would boost net margin to Rs 1.91/litre in the remaining days of June. However, marketing margins of the OMCs in Q1FY21 are seen to be at Rs 5.73/litre, more than twice the levels recorded in the corresponding quarter last year, even if prices are not raised any more in the month.

The fuel marketing margins of the OMCs had reached super-normal levels when consumption was down during the lockdown, as prices were not reduced when global fuel rates had dipped. However, as demand surged, the margins fell into negative territory due to rising international prices and retail rates remaining unchanged, even after the government raised excise duty by Rs 10-13/litre in early May.

Auto fuel margins are calculated on the average prices of petrol and diesel in the international market, which is reset once every 15 days. Petrol and diesel prices in Delhi had remained unchanged from March 16 to May 4, and thereafter stayed flat till June 6. The price adjustment for one day reflected the hike in state VAT, and did not contribute in OMCs’ marketing margins.

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