Price of Petrol and Diesel: After four years, government oil companies have raised the price of petrol and diesel by ₹3. However, since state-run oil companies continue to suffer losses as a result of increased crude oil prices, industry sources predict that fuel prices may increase even more in the days ahead.
New Delhi: Over the past two and a half months, the ongoing situation in West Asia has caused crude oil prices to soar. Oil prices are continuing trading above $100 and have reached $130 a barrel. State-owned oil marketing firms were allegedly losing close to ₹30,000 crore per month as a result.
For the first time in four years, the government raised the price of petrol and diesel by ₹3 per liter on Friday. However, given that oil companies continue to experience significant under-recoveries as a result of high crude oil prices, industry experts think this may not be the final rise.
According to industry sources, the price of crude oil has increased by almost 50% since the strikes involving Iran, the United States, and Israel on February 28. The most recent increase in fuel prices, according to experts, is still not enough to completely balance the growing losses that oil corporations are experiencing.
According to a senior industry executive, oil companies continue to lose about ₹11 per liter on petrol and almost ₹39 per liter on diesel despite the recent hike. This has sparked worries that if the price of crude oil stays high globally, more increases in the cost of petrol and diesel may occur in the upcoming weeks.
How Much Loss Are Oil Companies Facing?
State-run oil companies were allegedly losing about ₹14 per liter on petrol and ₹42 per liter on diesel before Friday’s increase in fuel prices. Only a minor percentage of these losses might be recouped with the recent ₹3 per litre hike in petrol and diesel prices.
According to industry experts, oil marketing businesses would need to raise fuel prices significantly in order to fully balance their under-recoveries and generate a profit.
On Friday, the price of crude oil also saw a significant increase. Brent crude closed at $109.30 a barrel, up 3.35%. Additionally, the price of the Indian basket of crude oil hit $109.30 per barrel, putting additional strain on domestic fuel retailers and raising the prospect of future increases in fuel prices.
The Oil Price Crisis Explained
- State-run oil companies are currently facing a loss of nearly ₹11 on every liter of petrol sold.
- On diesel, the under-recovery is even higher at around ₹39 per liter.
- Crude oil prices have surged nearly 50% due to the Iran conflict and rising geopolitical tensions in West Asia.
- Global crude oil prices have remained consistently above $100 per barrel for several days, increasing pressure on India’s fuel import bill and domestic oil companies.
Windfall Tax Imposed on Petrol Exports
In the meantime, fuel exports are subject to a windfall gain tax of ₹3 per liter imposed by the government. Simultaneously, the duty on aviation turbine fuel (ATF) was lowered to ₹16 per liter, and the tariff on diesel exports was lowered to ₹16.5 per liter. The updated rates went into force on May 16.
The Finance Ministry has announced that there will be no road and infrastructure tax on the export of petrol and diesel. According to reports, the windfall tax was implemented to increase local fuel supply amid the current geopolitical tensions between Iran, Israel, and the United States.
Furthermore, the current duty rates on petrol and diesel intended for residential use have not changed. The government has levied a Special Additional Excise Duty (SAED) of ₹3 per liter on fuel exports for the first time since the start of the West Asia crisis.
In the meantime, the charge on aviation turbine fuel (ATF) has been drastically decreased from ₹33 to ₹16 per litre, and the export tariff on diesel has been lowered from ₹23 to ₹16.5 per litre.
