New Delhi: Hikes in prices of petrol and diesel prices in India is likely to resume next week as state elections draw to a close. The prices of petrol and diesel had remained unchanged for a record 118 days in a row as state elections were slated to take place in Uttar Pradesh, Punjab and three other states. However, in the meanwhile, since crude oil prices have been on the rise, surging past the $100/barrel-mark after Russia launched an all-out war against Ukraine, oil marketing companies (OMCs) are likely to announce hikes in fuel prices to close the Rs 9 a litre gap.
JP Morgan said on Wednesday, "With state elections getting over next week, we expect daily fuel price hikes to restart across both gasoline and diesel."
The report said that oil marketing companies are expected to revert to normalised marketing margins as retail prices need to increase by Rs 9 a litre or 10 percent. "We expect a combination of small excise duty cuts (Rs 1-3 per litre) and retail price hikes (Rs 5-8 a litre) to reflect the pass-through of USD 100 per barrel oil," said JP Morgan.
The cost of Indian crude basked rose above US$102/barrel on March, the highest since August 2014. At the current prices, state-run oil retailers like Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) are making a loss of Rs 5.7 a litre on petrol and diesel. The figure does not take into account their normal margin of Rs 2.5 per litre.
Petrol and diesel prices are revised by OMCs on a daily basis. However, revisions have been held off for 118 days now. Currently, petrol prices are at Rs 95.41 a litre in Delhi and diesel is priced at Rs 86.67 a litre.
Russia accounts for a third of Europe's natural gas and around 10 percent of global crude oil production. Since crude oil imports from Russia constitute a very small percentage of India's overall crude oil imports, disruption in crude oil supply in not so much of a concern for India as the volatility in crude oil prices precipitated by the war in Ukraine.
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