Private fuel retailer Nayara Energy has raised petrol prices by Rs 5 per litre and diesel prices by Rs 3 per litre with immediate effect, as rising international crude and refined-product prices put pressure on retail fuel margins, news agency PTI reported on Saturday quoting people familiar with the matter. The price revision took effect in the early hours of Saturday.
Nayara Energy, which operates more than 7,000 fuel stations across India, is the country’s largest private fuel retailer. The latest increase comes amid renewed pressure on fuel retailers as global energy prices rise following geopolitical disruptions in crude and petroleum-product markets.
Historical pricing sequence alignment
This is the second hike by the private fuel retailer amid higher international oil prices after the Iran conflict disrupted energy supplies earlier this year. On March 26, the company had raised petrol and diesel prices by Rs 5 and Rs 3 per litre, respectively, taking petrol to Rs 100.71 a litre and diesel to Rs 91.31 at its outlets at the time.
State-owned oil marketing companies subsequently began revising pump prices in May.
Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation increased petrol and diesel prices through a series of staggered hikes, with the cumulative increase reaching around Rs 7.50 per litre for both fuels by late May. The fourth increase, announced on May 25, was Rs 2.61 per litre for petrol and Rs 2.71 for diesel.
Subsequently, Nayara reversed its March price increase. On July 1, it cut petrol prices by Rs 5 per litre and diesel by Rs 3, following a decline in international crude prices as tensions in West Asia eased.
The July reduction was the first cut by a fuel retailer in more than two years and brought Nayara’s prices broadly in line with those of state-owned oil marketing companies.
The latest price hike marks a renewed attempt by the private retailer to pass on higher costs after a period of relatively subdued retail fuel prices.
Public vs private OMC margin disconnect
State-owned oil marketing companies control more than 90% of India’s 1,04,137 petrol pumps and have traditionally kept retail fuel prices relatively stable despite fluctuations in international crude oil prices.
The widening gap between retail fuel prices and the cost of procuring fuel has emerged as a key concern for oil marketing companies.
On October 1, the government said private fuel retailers should not restrict petrol and diesel sales at their outlets. The direction came after Nayara Energy and Jio-bp restricted volumes at some stations amid losses on retail fuel sales.
Officials said the differential between retail and bulk diesel prices had prompted some industrial consumers to purchase cheaper fuel from retail outlets, putting additional pressure on supplies.
Jio-bp, the fuel retail joint venture between Reliance Industries Ltd and UK-based bp, operates 2,304 petrol pumps and has so far not revised petrol and diesel prices.
Negative marketing margins & profitability outlook
In September, rating agency Icra estimated that oil marketing companies were incurring negative marketing margins of around Rs 8 per litre on petrol and Rs 9 per litre on diesel, as retail prices remained unchanged despite a sharp rise in crude and petroleum-product prices.
Icra estimated that OMCs were losing around Rs 530 crore a day across petrol, diesel and LPG, with elevated crude prices and unchanged domestic fuel prices weighing on their profitability and cash flows.
The rating agency had said the combined refining and marketing operations of OMCs break even when crude prices are in the range of USD 85-90 a barrel. At prices above that range, and without corresponding increases in retail fuel prices, marketing losses are likely to emerge.
Nayara Energy operates a 20-million-tonne-a-year refinery at Vadinar in Gujarat and has more than 7,000 fuel stations across the country.
The latest price increase is likely to widen the difference between private and state-owned fuel outlets in the near term. A sustained rise in pump prices could increase freight and operating costs and, if passed on more broadly by oil companies, have implications for inflation and fuel demand.
At the same time, keeping retail prices below market-linked costs increases the losses borne by refiners and fuel retailers, potentially creating further pressure for price adjustments.