After falling for a short period, prices of diesel and petrol in the international market have hardened in the past 4-5 days, leading to increases in domestic retail prices of the fuels.
With freight-on-board (FOB) price of petrol softening to $79.31 per barrel and diesel to $82.72 per barrel in the third week of July, prices spiked and touched $82.5 and $86.28, respectively, on July 27.
The immediate effect was witnessed in the first two days of this week as local retail prices of diesel and petrol increased on both days after remaining constant or decreasing since July 14, 2018.
Petrol was available in Delhi at Rs 76.31 per litre on Tuesday and Rs 76.25 per litre on Monday compared with Rs 76.16 per litre on Sunday. The retail price of petrol was Rs 76.95 per litre on July 14, 2018.
Similarly, diesel was sold in Delhi at Rs 67.82 per litre on Tuesday and Rs 67.75 per litre on Monday compared with Rs 67.62 per litre on Sunday. The retail price of diesel was `68.61 per litre on July 14, 2018.
“The prices (international product prices) have been increasing again after cooling off, though entire effect is not evident in retail prices as we follow a 15-day average prices. However, the fact remains that prices have been increasing daily by $1 or so for the past four-five days,” said an oil marketing company (OMC) executive.
OMCs follow trade parity price (TPP) to arrive at the domestic prices. Under the mechanism of TPP, an 8:2 ratio of import and export parity prices of products is used.
Various charges like BS premium, inland freight and delivery charges as also marketing costs and margins of OMCs are added to the TPP — which is also the refinery transfer price or the price at which the refiners sell products to oil marketing firms — to find the price to the dealers, upon which the dealer commission, central excise, and later, state taxes are levied to arrive at the retail prices to the consumers.
Some states levy VAT on the rate inclusive of dealer commission.
The executive quoted above added that the international prices are still not in the comfort zone and OMCs are watching the price movements.
OMCs — Indian Oil, BPCL and HPCL — enjoy pricing freedom and the final price charged to consumers by the three companies differ and prices vary across retail outlets as well. All the three firms consider different cost and freight prices of landed fuels.