Who 'really' gained from petrol deregulation?

Riken Mehta

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Petrol prices were deregulated by the government on June 25, 2010 in an attempt to cut down the fuel subsidies and reduce the burden on upstream and downstream companies.  Crude import bill forms a major part of the CAD and fewer subsidies would also allow the government to spend more thereby propelling the growth of the economy. However, nothing has worked as per the UPA government’s expectation.

The burden of upstream companies like ONGC, Oil India and Gail have doubled so far since deregulation on higher under-recoveries and would soon become cash-strapped if things remain constant.

Downstream companies have not been able to pass on the complete hike of petrol and diesel to consumers despite diesel being deregulated in January this year by the government. Also, delay in receiving fuel subsidies led to heavy borrowing by OMCs to meet their working capital requirements. Barring BPCL which has exploration assets, these companies have not rewarded their shareholders who invested on hopes of turnaround since deregulation.

Brent crude has surged 33 percent while rupee has depreciated 34 percent since petrol deregulation. The consumers are now shelling out 50 percent more for petrol and diesel. Sales of auto companies also took a hit as the price differential between petrol and diesel has come down significantly. And it can’t get better with the timing of IOC FPO thereby forcing the government to give subsidies in the middle of the year to repair oil marketing company’s balance sheet.

* From 25-Jun-2010 to 31-Dec-2010

Particulars	On 25-Jun-2010	2010*	CY2011	CY2012	CY2013	Since 25-Jun-10
Avg Petrol (Rs/ltr)	52.2	56.51	69.52	74.6	75.97	50%
Avg Diesel (Rs/ltr)	39.88	47.77	44.98	47.84	56.56	50%
Avg Brent Crude (USD/bbl)	78.12	82.04	110.91	111.68	108.31	33%
Avg USDINR rate	46.54	45.7	46.67	53.49	57.99	-34%
Under Recovery (Rs Cr)		78190 (FY11)	1,38,541 (FY12)	1,61,029 (FY13)	60907 (H1FY14)	Over 4 lakh crore
Upstream burden		30297 (FY11)	55000 (FY12)	60000 (FY13)
BPCL	310.68	6%	-27%	49%	0%	15%
HPCL	401.05	-3%	-36%	15%	-26%	-46%
IOC	377.3	-10%	-26%	6%	-22%	-44%
ONGC	316	2%	-21%	4%	6%	-10%
Oil India	544.08	3%	-15%	-2%	0%	-14%
GAIL	482.75	6%	-25%	-7%	-4%	-29%

IOC hikes petrol prices by Rs 1.63 per litre

Ritika Dange, Riken Mehta

The Indian Oil Corp has hiked petrol prices by Rs 1.63 per litre effective midnight. The price hike is exclusive of the value added tax (VAT).

IOC has quoted reasons of a steep fall seen in the Indian rupee in the recent days as well as a surge in global crude prices. It added that the company is facing a revenue loss of Rs 14.50 per litre on the sale of diesel and the FY14 revenue loss on subsidised fuel is seen at Rs 82,000 crore.

However, the recent positivity seen on the currency has not gone unnoticed by the oil marketing company, who has said that it will pass on the benefit to customers if the Indian currency continues to rise in the days to come.

The domestic currency has depreciated close to 13 percent since June this year. Brent crude prices have surged 11 percent in the same period. This is the seventh increase in rates since June and in all petrol prices have gone up by a massive Rs 10.80 per litre, excluding VAT.

Following are the revised prices of petrol in four metros after oil firms hiked rates with effect from midnight tonight

Metro	Current Price (Rs/litre)	Revised Price (Rs/litre)	Increase (Rs)
Delhi	74.1	76.06	1.96
Kolkata	81.57	83.62	2.05
Mumbai	81.57	83.63	2.06
Chennai	77.48	79.55	2.07

Metro Current Price (Rs/litre) Revised Price (Rs/litre) Increase (Rs) Delhi 74.1 76.06 1.96 Kolkata 81.57 83.62 2.05 Mumbai 81.57 83.63 2.06 Chennai 77.48 79.55 2.07

Read more at: http://www.moneycontrol.com/news/economy/ioc-hikes-petrol-prices-by-rs-163-per-litre_949531.html?utm_source=ref_articl

Don't fool yourself! Diesel cars aren't price-efficient anymore...

Riken Mehta
Moneycontrol.com

Although the monthly 50 paise increment in diesel prices has managed to bring down under-recovery of oil marketing companies to some extent, it has impacted the auto industry negatively as far as sales of diesel vehicles are concerned.

In May last year, the difference between petrol and diesel rates was as high as Rs 33 with the latter commodity available at Rs 46 a litre. This led to boost in sales of diesel vehicles. But with continuous hike in diesel prices, the difference between the two has come down to Rs 14 which has effectively chased away buyers of diesel cars.

Mahindra and Mahindra (M&M) is one such industry player struggling to sell diesel vehicles. Speaking to CNBC-TV18, Pravin Shah of M&M admitted the industry was seeing de-growth in SUV sales on higher diesel prices. The excise duty of 3 percent levied on the SUVs by Finance Minister also impacted sales to certain extent. With the difference in petrol and diesel prices getting narrowed, sales of diesel vehicles will take a beating in the coming future.

How diesel prices have doubled in last decade

Riken Mehta
Moneycontrol.com

The latest price hike of diesel has sparked off a political debate and has angered the common man too. But economists argue that the raise was inevitable to ease economic pressures.

With this increment, diesel will now cost Rs 52.45/litre, which is a two-fold jump from Rs 23.29/litre available in September 2002. Based on Kirit Parikh committee's recommendations, the government decontrolled petrol in June 2010, but diesel continued to be subsidized. Oil marketing companies likeHPCL  , BPCL  , IOC  were selling the fuel at least Rs 13-15/litre lower than its actual cost.

Post the hike in diesel prices and capping of LPG cylinders to 6 per family, OMCs will see their under-recoveries shrink by roughly Rs 20,300 crore in FY13 than the earlier estimation of Rs 1.8 lakh crore.
 
Here's a snapshot of diesel price movement in the last 10 years. Data Source: www.mypetrolprice.com