OMCs to hike petrol prices again

After 2 consecutive rounds of rollback in retail petrol prices last month, domestic fuel retailers are mulling the possibility of another petrol price hike by the end of this week. If the oil marketing companies (OMCs) are successful in getting an informal nod from the Ministry, one can expect retail petrol to be dearer by Rs 0.65 per litre.

Compared to the last time when the OMCs had rolled back petrol prices on Nov 30, 2011, the rupee has weakened by a further 4% to touch new lows of Rs 54.26 per dollar. International crude prices have also remained firm, with no signs of abating in the near future. As a result, the OMCs have decided to pass on the incremental under-recovery that they are incurring on petrol.

However, keeping in mind the current opposition that the govt. has been facing in the winter session of the Parliament, as well as the sensitivity of this issue and its negative implications on the smooth running of the House, the OMCs are highly skeptical about introducing such a hike before the current session comes to a close on Dec 21, 2011.

On the bourses, the shares of the domestic OMCs – Indian Oil, HPCL and BPCL – have rallied well since morning, over expectations of a rate hike. BPCL rallied 3% to Rs 530, HPCL rose 2.5% at Rs 284 and Indian Oil was up 2% at Rs 273 on the BSE.

With the OMCs currently losing around Rs 393 cr per day on the subsidised sale of diesel, kerosene and LPG, the total under-recovery for this fiscal is projected to be Rs 132000 cr, as against Rs 79000 cr last fiscal. As the prices of these fuels are regulated by the central govt. and with a couple of state elections coming up over the next year, the chances of any hike seem bleak.

Having already reported combined massive losses of Rs 14000 cr in Q2 FY12, and with zero clarity on the subsidy-sharing mechanism, the only option left for the OMCs is to tweak the petrol prices and make an effort to stay afloat in these trying times.