The spike in fuel prices continued on Friday as the prices for petrol in the national capital went up by 29 paise per litre up from the previous rate of Rs 75.32 to come at Rs 75.61. Diesel prices also surged by the same amount to cross the Rs 67 mark at Rs 67.08.
The spike is being seen as a fallout of rise in the global crude oil prices that went above $80 per barrel.
Brokerage firms had warned of a Rs 4 per litre hike on Thursday if state-owned fuel retailers are to return to pre-Karnataka poll hiatus margin levels.
No sooner had Karnataka polled to elect a new state government, state-owned Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) on Monday ended a 19-day hiatus in revising petrol and diesel prices and reverted to the practices of changing rates on a daily basis.
Since then petrol price had risen by 69 paisa a litre, including a 22 paisa hike effected from Thursday, 17 May, that took rate in Delhi to Rs 75.32, the highest in almost five years.
Diesel prices have gone up by 86 paisa a litre, including a 22 paisa increase on Thursday that took the rate to their highest ever of Rs 66.79 a litre in Delhi.
Our computation suggests that downstream oil marketing companies (OMCs) are required to increase retail prices of diesel by a steep Rs 3.5-4 a litre and gasoline (petrol) by Rs 4-4.55 per litre in the coming weeks to earn normative gross marketing margins of Rs 2.7/litre.Kotak Institutional Equities in a report
The increase is based on assumption that global price of diesel and petrol and Rupee-US Dollar exchange rate remain stable hereon.
We note that the lack of price hikes over the past three weeks, before Karnataka elections amid a sharp increase in global crude/product prices, has resulted in sharp moderation in gross marketing margins to around Rs 0.5-0.7 a litre.Kotak Institutional Equities in a report
Last week, ICICI Securities had said that auto fuel net marketing margins were weak at Rs 0.31 a litre due to no price hike after 24 April.
OMCs returned to daily price revision from 14 May. They are estimated to have lost about Rs 500 crore on absorbing higher cost resulting from the spike in international oil rates and fall in rupee against the US dollar.
The benchmark international rate for petrol, used for revising rate on 24 April, had gone up from USD 78.84 per barrel to USD 82.98 on 14 May. It has further risen to USD 83.30, indicating more daily hikes would be needed to level retail price with cost.
Similarly, benchmark international diesel rates during this period have climbed from USD 84.68 per barrel to USD 88.93. Also, the rupee has weakened to Rs 67.06 per US dollar from Rs 66.62, making imports costlier.
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