Auto fuel price hike in line with international prices firming up: Oil PSUs

Our Bureau New Delhi | Updated on June 29, 2020

The steep rise in petrol and diesel prices is on the back of an increase in the international price of these commodities, according to officials from public sector oil companies.

But the even steeper increase in diesel prices after the Covid-19 lockdowns can be attributed to higher demand, with the transportation segment gaining more momentum than personal mobility around the world, they said.

Auto fuel prices in Delhi were hiked on Monday to ₹80.43 a litre for petrol and ₹80.53 a litre for diesel. This hike had followed a single day of no price revisions, on Sunday. Petrol and diesel prices have steadily increased across the country since June 7, when oil companies resumed the daily price revision mechanism after a hiatus of 83 days amid the lockdowns.

“Internationally, there is a recovery of petrol and diesel prices. But it appears that there is more movement of commercial vehicles, like trucks, so the increase in demand for diesel is more than that for petrol. The price of auto fuels in India is benchmarked to the international prices. This results in domestic prices going up or down, irrespective of whether the companies make the same gains or not,” a company official said.


The pricing mechanism

Responding to queries during a quarterly earnings press interaction, Chairman of Indian Oil Corporation, Sanjiv Singh, said, “We follow international prices. We follow the Arab Gulf prices to work out the domestic prices which are required to be maintained. There is a formula and guideline which is to be followed and we follow the trade parity concept, which considers 80 per cent import and 20 per cent export.”


Responding to concerns regarding the steep rise in petrol and diesel prices after the lockdowns ended, Singh said: “The starting point is the typical Arab FOB (free on board) price. They have been at reasonable margin levels for petrol and diesel,” Singh said.

“Now we see the demand again pick up so we see crude oil, petrol and diesel prices in the international market also go up,” he added.

Published on June 29, 2020

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