Essar, RIL may hike petrol, diesel prices

Last Updated: Wed, Aug 15, 2012 04:36 hrs
Undated handout photo of India's Reliance Industries KG-D6's facility

While the government-controlled oil marketing companies are waiting for a political nod to raise diesel and even petrol prices, private retailers led by Essar Oil Ltd are planning to increase petrol price by Rs 3 and diesel by around Rs 1 per litre this week.

"We follow market-linked prices at our 1,406 operational retail outlets. We keep reviewing the price normally on a forthnight basis. The next review comes up on August 16," S Thangapandian, chief executive officer (marketing) at Essar Oil, said.

The company currently sells petrol at prices similar to government companies in four states and charges a price higher by Rs 0.50 to Rs 2 in other states. On diesel, the price charged is higher by Rs 12-14 per litre than government companies. The high price difference in the case of diesel has affected sales. For Essar, diesel forms only one-tenth of its retail sales, while the rest is petrol. It has another 220 outlets in various stages of completion.

The Mukesh Ambani-led Reliance Industries Ltd (RIL), which operates just 450 of its 1,400 retail outlets, is learnt to follow a similar price structure to Essar. An industry official said RIL was looking to make price adjustments this week. The company, which had captured 18 per cent diesel market share around mid-2006, scaled down retail operations since then as it failed to compete with highly subsidised prices of government companies.

IndianOil Corp Ltd, the country's biggest fuel marketing company, is finding it difficult to pass on the price increase in petrol, a decontrolled product. The company is currently losing Rs 1.37 on every litre of petrol, based on previous fortnight's international prices. This is expected to go up to Rs 3.56 from midnight tomorrow, based on current fornight rates.

Chairman R S Butola on Thursday said the company was in talks with the government to take petrol back to the control regime so that the losses would be reimbursed as was the case with diesel, kerosene and cooking gas.

While petrol was decontrolled in June 2010, the oil companies still need to seek permission from the government before revising prices. Even parties which are part of the ruling coalition, the Trinamool Congress being one, have attacked the government for petrol price rises.

The three government-owned oil marketing companies--IndianOil, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd--together lost Rs 4,890 crore on sale of petrol during the last financial year. Losses continue in the current financial year too, with IndianOil alone losing Rs 950 crore in the first quarter. On diesel, which is officially under control, the current loss is Rs 12.06 per litre. Diesel price was last revised in June 2011.

While private companies have not benefited from petrol decontrol, they continue to oppose any idea to take it back to the control regime. "Going back to administered pricing mechanism in petrol will be retrograde when the process has to be moving forward on liberalisation," said Thangapandian.

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