An attendant holds a fuel pump at a small roadside petrol station. (Photographer: Luis Tato/Bloomberg)

Petrol, Diesel Prices Hiked For Sixteenth Consecutive Day

State-run oil marketers hiked petrol and diesel prices for the sixteenth consecutive day, adding to the burden of consumers reeling from record retail rates.

While petrol price was hiked by 16 paise today to Rs 86.24 a litre in Mumbai, diesel was raised by 15 paise to Rs 73.79 a litre, according to data released by Indian Oil Corporation Ltd. That makes petrol and diesel costlier by Rs 3.83 a litre and Rs 4 a litre, respectively, since May 14, when oil marketing companies resumed daily price revisions after a 19-day freeze in the run-up to the Karnataka elections.

Crude Falls

The rally in oil prices that took Brent crude to the $80-mark for the first time since 2014 stalled last week after Saudi Arabia and Russia proposed easing output curbs after eliminating an inventory surplus that had sparked the biggest price crash in a generation.

Brent crude snapped its three-day losing streak to trade 0.5 percent higher at $75.65 per barrel as of 10:30 a.m.

Also read: Let India's ONGC Cash Grab Remain a Bad Dream

Margins Pressure For Oil Marketers

The state-run oil marketers’ gross marketing margins or the markup that they earn on the sale of every litre of petrol and diesel declined even after fuel prices were hiked and crude oil rates eased.

The gross marketing margins have been falling since last month, after rising during January-March period this year, according to data compiled by BloombergQuint.

The gross marketing margin earned on sale of every litre of petrol and diesel declined 12 percent and 14 percent, respectively last month, compared to corresponding month in the previous year. It slumped 70 percent so far this month, compared to April 2018.

Also read: Windfall Tax On ONGC In Offing To Soften Petrol, Diesel Prices

States Can Give Up Additional Gains

States can cut petrol price by Rs 2.65 per litre and diesel by Rs 2 a litre if they decide to forego potential additional gains out of high crude oil rates, news agency PTI reported citing an SBI Ecowrap study.

States could gain at least an additional Rs 18,728 crore of revenue in the financial year 2018-19 from the rise in crude prices, according to SBI’s analysis.

Given that these revenue if foregone will not impact states fiscal position, we estimate that on an average, states can cut petrol prices by Rs 2.65 per litre and diesel by Rs 2 per litre, if the entire revenue gain was to be neutralised. This is the most plausible scenario under the current circumstances.
SBI Ecowrap Report

States could earn additional revenue of Rs 2,675 crore over and above the budget estimates for every $1 per barrel increase in oil prices, the report added.

Also read: Government Rules Out Excise Duty Cut To Cushion Petrol Prices

With inputs from PTI