The Hindu Business Line : Oil price hike unlikely despite soaring crude price

Despite the Indian crude basket touching $73.56 a barrel on August 4, oil marketing companies are unlikely to go in for any immediate revision of retail oil prices.

The Government had earlier taken an in-principle decision to allow the companies to revise prices without any approval if the Indian crude basket crossed $70.

Mr S.V. Narasimhan, Director (Finance), IOC, told Business Line: "We cannot take a position on the basis of volatility seen recently. We have to take into account the trends seen over a period, say a quarter. Cumulatively, the Indian basket average is still less than $71 a barrel."

For the first quarter of the current fiscal, the average price of the Indian basket of crude oil stood at $67.13 and the average for April till August 7 was $68.45.

The average for the first week of August was $73.35. The Indian crude basket had touched an all-time high of $73.96 on July 14 this year.

Govt monitoring

This movement in the Indian basket was not what the Government had anticipated when increasing the price of petrol (Rs 4 a litre) and diesel (Rs 2 a litre) effective June 6, sources said. "This was an unprecedented rise."

In July, the average price of the Indian basket was $71.36. Brent on Monday touched an intra-day high of $77.73. (It stood at $76.55 on August 4.)

When contacted, Ministry sources said: "The Government is closely monitoring the international oil prices and will continue to protect the interests of the consumers."

According to industry sources, if the current situation continues for some time, options like duty rejig on the petroleum products in order to insulate the consumers from the impact of the surging crude prices might have to be considered.

In June, the Indian basket price average was $66.80, while in May it was $67.29.

The recent price hike (June 6) on retail of petrol and diesel was taken factoring in these two averages. The Indian basket consists of Oman-Dubai sour grade of crude and Brent dated sweet crude in a 58:42 ratio.

Autonomous adjustments

As regards the in-principle decision taken by the Government to permit autonomous adjustments in prices of sensitive petroleum products once every month, industry sources said that they were yet to hear from the Ministry.

For every dollar increase in crude oil prices, there is a need to raise retail prices of a litre of petrol by 39 paise, diesel by 30 paise, kerosene by 36 paise and cooking gas by 67 paise.

India imports about 76 per cent of its crude requirements in a year. IOC is suffering under-realisation of Rs 6.31 a litre on petrol, Rs 8.25 on diesel, Rs 18.69 on kerosene and Rs 166 per cylinder on cooking gas.

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