BAD NEWS! Petrol price may go up again

After a gap of four months, oil marketing companies are looking for an increase in petrol prices, with under-recovery on the fuel set to rise to Rs 3.40 a litre later this week from Rs 1 at present.

The OMCs are also expected to increase the price of aviation turbine fuel by around Rs 1,250 a kilolitre from the current Rs 56,260 a kl in Delhi.

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The OMCs are also expected to increase the price of aviation turbine fuel by around Rs 1,250 a kilolitre from the current Rs 56,260 a kl in Delhi.

The weakening rupee and firm international petroleum product prices have expanded the revenue losses of OMCs.

The loss on diesel would also increase by around Rs 1.25 a litre to nearly Rs 6 in the second fortnight of September.

An oil company executive said a decision on a petrol price rise was likely on Thursday.

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The government had decontrolled petrol prices in June 2010 but has been indirectly exercising control.

The previous rise in petrol was done on May 15, when companies raised prices by Rs 5 a litre, though they were actually losing Rs 10 a litre.

However, in the weeks that followed, the losses on petrol came down and there were even periods when the companies made a marginal profit on it, since the government had removed the five per cent customs duty on petrol (on June 24).

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On the same day, it also removed the five per cent customs duty on diesel and crude oil and raised the prices of diesel, kerosene and liquefied petroleum gas.

Currently, the PMCs -- Indian Oil, Bharat Petroleum and Hindustan Petroleum incur an under-recovery or revenue loss of Rs 4.57 on a litre of diesel.

These companies, which purchase crude oil at market rates, are required to sell diesel, kerosene and LPG at government-set prices, resulting in losses.

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All the three government-owned companies incurred a heavy loss in the April-June quarter on heavy under-recovery that was not fully compensated by the government.

Oil companies calculate their under-recovery or over-recovery of a product based on its trade parity (80 per cent import price weight and 20 per cent export price weight) for the previous fortnight.

The price of ATF, 40 per cent of the operating cost for airlines, are already around 40 per cent higher compared to last year's corresponding price.

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The decline, a relief, comes after a gap of six weeks during which prices moved up thrice. The rupee has averaged Rs 46.46 so far in September against the dollar, higher than the Rs 44.42 in July and Rs 45.32 in August.

The price of the Indian basket of crude oil, that averaged $107.24 a barrel in the last fortnight of August, has averaged well over $111 so far in the current fortnight.