As crude surges, no early end in sight for weekly diesel price hikes

  • Anupama Airy, Hindustan Times, New Delhi
  • Updated: Feb 22, 2014 02:47 IST

The monthly hikes of 50 paise a litre in diesel prices seem to be only getting stretched with every passing month.

Thanks to the increase in prices of crude oil and a marginal decline in the rupee’s value against the dollar, under-recoveries or losses incurred by state-owned oil companies for selling fuel below cost price have risen from Rs 7.39 a litre to Rs 8.31 a litre, extending the monthly price hikes for a few more months.

The hikes began in January last year and prices have already risen by over Rs 7 a litre. If losses remain at current levels, the hikes may continue till April 2015.

A 50 paise monthly hike translates into 57 paise a litre increase in Delhi after adding taxes.

The effective hike varies from state to state depending on different sales tax component.

Even after 13 hikes in diesel prices, the losses of oil companies on diesel sales have again climbed to Rs 8.31 a litre in the first fortnight of February.

This means that consumers across the country will have to bear the price hike till the time losses are completely wiped out.

The losses on diesel had fallen to Rs 3.5 a litre in May 2013 but following the rupee’s fall against the dollar coupled with high global oil prices, losses increased to Rs 14.5 a litre in September 2013.

The average price of the Indian crude oil basket moved up to $106.40 a barrel on February 14, 2014 against $106.06 on February 13, 2014.

The government had in January given partial freedom to state retailers to raise consumer prices of the fuel in small doses every month until pump prices are aligned with global rates.

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