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New Delhi, June 8, 2020
Oil marketing companies (OMCs) on Monday increased the price of petrol and diesel by 60 paise per litre for the second consecutive day to cover the rise in global product prices.
The increase has been made under the dynamic pricing system for daily revision of fuel prices, which the OMCs resumed after a gap of 80 days during the lockdown period.
In the national capital, the retail price of both petrol and diesel has increased by 60 paise to Rs 72.46 and Rs 70.59 per litre, respectively. In other cities, the increase could vary depending on the tax structure on products.
Prices of transportation fuel were last revised under the dynamic pricing policy on March 16 but there were a few instances of price hike 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 fuel.
Already, the gap between cost and sale price of petrol and diesel for the 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 the global prices, auto fuel prices may be increased by 40-60 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 the current trend, crude prices are way above price levels in April when even benchmark Brent crude had slipped below $20 a barrel. Brent is now trading at over $42 a barrel.
However, the lockdown has also curved demand for auto fuel. This could maintain some check on prices.
Raising retail prices has become important for the OMCs now as the recent steep excise duty hike without the resultant increase in petrol and fiscal prices, had substantially brought down its marketing margins from a 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.