New Delhi: State-run oil companies Friday raised diesel prices for bulk buyers excluding state transport corporations by about ₹ 22 per litre, or around 25 per cent, to partly offssurging crude rates, reflecting the escalating impact of the Iran war on India’s energy sector. The move may stoke wider inflation, adding to the government’s woes.
Oil companies also raised the retail price of premium petrol by about ₹ 2 per litre, while leaving those of regular petrol and diesel unchanged. Indian Oil’s XP95 is now priced at ₹ 101.89 per litre in Delhi, up from ₹ 99.89. Premium petrol accounts for about 5 per cent of total petrol sales, the company said. Prices vary marginally across states due to differences in taxes, and by a few paise between companies.
Diesel for bulk users in Delhi will now cost ₹ 109.59 per litre, higher than ₹ 87.67.
Recouping Some Losses
Bulk customers account for about 12 per cent of India’s diesel sales, with the rest sold through retail outlets. Bulk consumers include the railways, defence, state transport corporations, miners, manufacturers, and construction companies.
Executives said the steep hike in bulk diesel rates while keeping retail prices of the fuel unchanged could trigger diversion, with some bulk buyers seeking to source cheaper fuel from retail pumps. The increase would however help refiners partly recoup the cost escalation due to the sharp rise in global oil prices since the Iran war erupted. Companies would also be able to effectively manage their working capital needs, which tends to swell when crude prices rise.
Oil firms are currently losing about ₹ 32 per litre on diesel, and the ₹ 22 hike would only partially bridge the gap, said an oil company executive. “Higher losses at state-run oil companies will ultimately become the government’s burden,” the executive said. Ensuring that large institutional buyers such as defence and the railways pay close to market rates would help limit the build-up of such liabilities, the executive said.
State transport corporations will not be affected by the diesel price increase, but all other categories of bulk users will have to pay the higher prices, said a second oil company executive. Private trucks refuelling at retail pumps will remain unaffected, while those filling at their own depots will face the increase.
“This will naturally lead to some diversion, as those being asked to pay higher prices will look to source cheaper fuel from petrol pumps,” the executive said. Rising fuel costs for manufacturers are likely to be passed on to consumers, adding to inflationary pressures, the executives said. Soaring crude prices have also pushed up working capital requirements for oil marketing companies, with the price rise expected to provide some relief, executives said.
