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Fuel prices rise as daily revision resumes after over 80 days
New Delhi, June 7, 2020
Oil marketing companies have resumed the dynamic pricing system for daily revision of fuel prices after a gap of more than 80 days during the coronavirus (COVID-19) crisis.
In the national capital, the price of both petrol and diesel was increased by 60 paise to Rs 71.86 and Rs 69.99 per litre, respectively.
Prices of transportation fuel were last revised under the dynamic pricing policy on March 16, though there were a few instances of price hike only when the respective state governments hiked VAT or cess.
In a bid to increase revenues during the nationwide lockdown, several state governments raised taxes imposed on transportation fuels.
With the revision, petrol prices in Mumbai, Kolkata and Chennai rose to Rs 78.91, Rs 73.89 and Rs 76.07 per litre, up from the previous close of Rs 78.32, Rs 73.30 and Rs 75.54, respectively.
Similarly, the diesel prices in Mumbai, Kolkata and Chennai increased to Mumbai Rs 68.79, Rs 66.17 and Rs 68.74 per litre, respectively, up from Rs 68.21, Rs 65.62 and Rs 68.22.
Already, the gap between cost and sale price of petrol and diesel for OMCs has reached around Rs 4-5 per litre. If this has to be covered over a period of time, given there is no further increase in global prices, auto fuel prices may be increased by 40-50 paise per day for a couple of weeks to cover the losses.
The increase in retail price under daily price revision would largely depend on prevailing oil prices and global oil market at the time to determine the retail price. Going by current trend, crude prices are way above price levels in April when even benchmark Brent crude had slipped below $20 a barrel.
However, the lockdown has also curved demand for auto fuel. This could maintain some check on prices.
Raising retail prices became important for OMCs now as the recent steep excise duty hike without resultant increase in petrol and fiscal prices, had substantially brought down its marketing margins from record high level of Rs 12-18 per litre.
If it is unable to raise prices when the global crude prices are rising, it would start incurring losses that will get steeper.