New Delhi: Petrol prices in Kolkata have touched Rs 113.47 per litre, while diesel reached Rs 99.82 per litre after state-owned oil companies implemented the fourth increase in retail fuel rates within 11 days. This latest hike raised petrol prices by Rs 2.86 and diesel by Rs 2.80, as companies aim to cut losses from selling auto fuels below market cost.
Cumulative Impact of Fuel Hikes
The cumulative increase in petrol and diesel prices in Kolkata now stands at Rs 8.06 and Rs 7.80, respectively. Despite these hikes, the government noted that cumulative under-recoveries on petrol, diesel, and LPG have slightly decreased to below Rs 600 crore per day, suggesting that further increases may be on the horizon.
Government Response and Justification
After the first hike of Rs 3 per litre on May 15, amid the current geopolitical situation that disrupted energy supplies and triggered a global surge in crude prices, the government had stated that under-recoveries had declined by 25% to Rs 750 crore per day. In Mumbai, Finance Minister Nirmala Sitharaman defended the price hike, calling it a market-driven revision by oil marketing companies in response to soaring global crude prices. She emphasized that the government shielded consumers for about 75 days by over Rs 1 lakh crore annually through a Rs 10 per litre excise cut.
Price Variations Across Cities
In Delhi, petrol breached the Rs 100-per-litre mark for the first time, reaching Rs 102.12 after a hike of Rs 2.61. Diesel prices rose by Rs 2.71 to Rs 95.20 per litre. In Mumbai, petrol now costs Rs 111.21, while diesel is priced at Rs 97.83. In Chennai, petrol costs Rs 107.77 per litre and diesel Rs 99.55. The quantum of hike varies due to different value-added tax structures across states.
Official Statements on Global Crude Impact
Sujata Sharma, Joint Secretary in the Ministry of Petroleum, stated that rising global crude prices have affected all countries, but the impact on India is lower because losses are being absorbed by the government and oil companies. She noted that globally, petrol prices have increased by 22% and diesel by 27%, whereas in India, the increases are much lower at 7.7% for petrol and 8.6% for diesel. Sharma added that before the fuel price increase, the government took all possible measures, including reducing excise duty on petrol and diesel by Rs 10, which impacts the exchequer by Rs 14,000 crore annually. Since 2021, excise duty on petrol and diesel has been reduced by Rs 21 and Rs 24, respectively. Despite these steps, oil marketing companies were losing Rs 1,000 crore per day, which has now come down to under Rs 600 crore after the hikes.
Financial Implications for Oil Companies
Justifying the hikes, Sharma explained that the profit earned by the three state-run oil marketing companies in the last financial year would be wiped out by losses incurred in just one quarter of the current fiscal. She emphasized that these companies need funds for capital expenditure to raise refining capacity to 300 million tonnes per annum over the next 3-4 years. Taxes paid by these companies to the government are used for building schools, hospitals, roads, and various welfare programs.
Analyst Perspective
Corporate ratings agency ICRA stated that despite the latest increase, under-recoveries remain high due to mounting losses on domestic LPG sales and the elevated premium over the crude benchmark.
