The Hindu Business Line : Petro price hike pumps up pvt players

New Delhi/Mumbai, July 2 The fuel price hike has come as a breather to private retailers such as Essar Oil and Reliance Industries, as it closes the gap between the price at which they and their public sector counterparts sell petrol and diesel.

Every litre of diesel and petrol sold from Essar and Reliance outlets will now be dearer by up to Rs 1.50 and Rs 2.50 a litre respectively. While in some places it will be at the same price as that of the PSUs.

The recent surge in global crude oil prices made the going tough for these companies as they tried hard to cope with the lower government-controlled PSU pricing.

Price differential

“This hike will definitely narrow the price differential. It is a huge respite as we were otherwise reaching a situation like last year where the differential would have almost become Rs 6 a litre,” industry sources told Business Line.

The second fortnight of June saw the differential in petrol at Re 1-Rs 3.50/litre, which was expected to touch Rs 5 in July had the price hikes not happened. In the case of diesel, the differential was Re 1-Rs 2.50/litre and could have gone beyond Rs 3/litre.

While Essar sells both petrol and diesel, Reliance has confined itself to retailing diesel. The two had restarted their businesses after the price differential with PSU refiners had neutralised only to see the gap increase.

Essar commissioned all its 1,230 outlets while Reliance went slow and activated barely 50 of its 1,432 outlets.

Spiralling crude

The fuel price hike has also been welcome news to the PSU refining trio of IndianOil, Hindustan Petroleum Corporation and Bharat Petroleum Corporation though they believe that an encore is unlikely even if crude touches the $85 a barrel mark.

“We are aware that crude will continue its price spiral and could touch the $80-mark by end-June and possibly go a little higher subsequently. Wednesday’s price hike announcement is intended to cover that eventuality too,” an oil industry executive told Business Line.

“Problems could arise if crude inches towards the $90-100-mark which could then require Government intervention,” he added.

Subsidy on cooking fuels

There is still some doubt on the issue relating to subsidies on cooking gas (LPG) and kerosene. The Government has indicated that it will bear the burden but it is not clear if these losses will be transferred to the Budget or whether the refiners will be compensated by way of oil bonds.

Sources say the Finance Ministry has been averse to issuing oil bonds as has been the case during the last three years. Last fiscal alone saw nearly Rs 75,000 crore worth of bonds issued when the oil price crisis had reached unmanageable levels and the refiners were strapped for cash.

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