Petrol price may be cut by Rs 1.6 per litre soon

Petrol price may be cut by about Rs 1.60 per litre later this month as appreciation of rupee against the US dollar has helped state firms make profit on the fuel. Indian rupee appreciated to five-month high since the government announced allowing foreign direct investment (FDI) in multi-brand retailing. This has eased the cost of imports for oil firms, helping them make profit on sale of petrol. “Yes, there is about Rs 1.60 per litre profit on petrol since October 1. But we want this trend to stabilise before we think of cutting retail prices,” a senior executive at one of the three state-owned fuel retailers said.

Petrol price was last revised on July 24 when it was raised by 70 paise to Rs 68.48 per litre in Delhi. It was last cut on June 3 when rates were reduced by Rs 2.02 per litre. The current profit is mainly on account of strengthening of rupee – from Rs 55.58 to a US dollar average in the second half of August to Rs 54.12 last fortnight.

Also, the price of international gasoline, against which the domestic retail prices are benchmarked, have eased from $126.11 per barrel to $122.31. Together, these have helped oil firms, which lost about Rs 6,000 crore in revenue on selling petrol below cost this fiscal, make profits. Rupee has further appreciated to Rs 52.28, which would further give then scope for a price cut.

“We are committed to passing on any gains that we make but all we are wanting to ensure is that this is not a temporary trend which can reverse in near future,” the executive said. While oil companies are tight-lipped about the timing of the reduction, some in the industry believe the prices may be cut closer to assembly elections in Gujarat and Himachal Pradesh.

Other than petrol, the oil firms continue to lose heavily on diesel, cooking gas (LPG) and kerosene. Indian Oil Corp (IOC), Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL) sell diesel at a loss of Rs 12 per litre. Similarly, they lose Rs 35.63 on sale of every litre of kerosene through the PDS and Rs 468.50 per 14.2-kg LPG cylinder.

If the trend continues, they will end the fiscal with a revenue loss of a staggering Rs 176,937 crore. The three firms reported a combined revenue loss of Rs 47,811 crore on fuel sales in the first quarter. Of this, upstream firms like ONGC made good Rs 15,061 crore by way of discount of crude oil they sell to them.

The ministry sought cash subsidy for the remaining Rs 32,750 crore but the Finance Ministry has not released any. In the absence of the subsidy support, IOC reported the highest quarterly net loss by any Indian company at Rs 22,451 crore for April-June. HPCL posted Rs 9,249 crore net loss in April-June while BPCL reported a net loss of Rs 8,836 crore for the first quarter.

Oil firms would most likely post net losses even in the second quarter as the logjam in Parliament over coal block allocation has meant that supplementary demands for grants are not approved and no subsidy payout is possible till the next winter session of Parliament in November/December.