Petrol prices up by Rs 3.14; Constrained to do so: OMCs
New Delhi   16-Sep-2011

After guarding the price line for two-and-a-half months to allow the monsoon session of Parliament to get over, state-run oil marketing companies (OMCs) today announced a hefty increase in petrol prices.

Market leader IndianOil (IOC) said that it was “constrained” to raise the per litre price of petrol by Rs 3.14 or more due to a “combination of unprecedented factors”.

IOC said the increase in free on board (FOB) price of crude and the devaluation of the rupee were the factors for revising the retail consumer price. “The impact due to exchange rate is Re 0.48 and due to increase in international prices is Rs 1.72 per litre. The balance impact of Rs 0.53 is due to value added tax,” the company said.

“The FOB was $119.41 per barrel in the last fortnight, which has gone up to $125.18, an increase of 4.8 percent. Similarly, the exchange rate has gone up from Rs 45.67 per dollar to Rs 46.29 per dollar,” the company reasoned.

IOC said that these factors had resulted in an increase of under-recovery on petrol to Rs 2.61 per litre starting September from Rs 0.41 per litre in earlier months.

The FOB price is used only for ocean or inland waterway transport. It is an international trade term of sale, in which, the seller clears the goods for export and is responsible for the costs and risks of delivering the goods by ship at the destination port.

In the past, OMCs have invoked the rising price of crude oil to endow rationality for passing the burden on the consumer.

This time around, it was not possible for them to blame crude prices as the average price has fallen to $106.94 a barrel in August from $112.37 per barrel in July and $109.85 in June.

The new prices will be effective from Thursday midnight. The last tinkering of petrol prices was done on July 1 after a hefty compensating hike of Rs 5 a litre on May 15. It’s the tenth hike since the government decontrolled petrol pricing in June last year.

Diesel, domestic LPG and kerosene price were hiked by Rs 3 per litre, Rs 50 per cylinder and Rs 2 per litre this June.

Loss on decontrolled petrol until September 15 was Rs 2,427 crore for the industry which was not passed on to the customers. If the prices had not been revised, the loss to the OMCs would have been Rs 15 crore per day.