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Fuel Prices In India Need To Rise Rs 12 To Match Oil Price Surge: Report

New Delhi:

Petrol and diesel costs, frozen for the previous 4 months given meeting elections in states like Uttar Pradesh, should be elevated by over Rs 12 per litre by March 16 for gas retailers to interrupt even.

International crude oil costs shot near $120 a barrel for the primary time in 9 years on Thursday earlier than retreating a bit of to $111 on Friday, however the gulf between price and retail charges has solely widened.

With worldwide oil costs – on which home gas retails are instantly benchmarked – spiking within the final two months, state-owned gas retailers “need a massive price hike of Rs 12.1 per litre on or before March 16, 2022, just to breakeven and a price hike of Rs 15.1 is required” after together with margins for oil corporations, ICICI Securities mentioned in a report.

According to data from the oil ministry, the basket of crude oil India buys rose to $117.39 per barrel on March 3, the very best since 2012, in line with data from the Petroleum Planning and Analysis Cell (PPAC). 

This compares to a mean of $81.5 per barrel value of the Indian basket of crude oil on the freezing of petrol and diesel costs in early November final 12 months.

“With state elections getting over next week, we expect daily fuel price hikes to restart across both gasoline and diesel,” JP Morgan mentioned in a report.

The seventh and ultimate section of polling for the Uttar Pradesh legislative meeting is on March 7, and the counting of votes is slated for March 10.

“Auto fuel net marketing margin is minus Rs 4.92 per litre on March 3, 2022, and Rs 1.61 in Q4 FY22-to-date,” ICICI Securities mentioned. “However, net margin is likely to plummet to minus Rs 10.1 per litre on March 16 and minus Rs 12.6 on April 1 at latest international auto fuel prices.” The brokerage mentioned, “steep price hikes are required as the strength in gross refining margins does not suffice for sharp quarter-on-quarter fall in net auto fuel marketing margin”.

Oil costs have been on the boil ever since Russia put its forces on the Ukraine border final month. They spiked after it invaded the central Asian nation on fears that oil and fuel provides from vitality big Russia might be disrupted by the battle in Ukraine or retaliatory western sanctions.

Russia makes up for a 3rd of Europe’s pure fuel and about 10 per cent of worldwide oil manufacturing. About one-third of Russian fuel provides to Europe often journey by means of pipelines crossing Ukraine.

But for India, Russian provides account for a tiny proportion. While India imported 43,400 barrels per day of oil from Russia in 2021 (about 1 per cent of general its imports), coal imports from Russia at 1.8 million tonnes in 2021 made up for 1.3 per cent of all coal imports. India additionally buys 2.5 million tonnes of LNG a 12 months from Gazprom of Russia.

While provides appear to be of little fear for India, it’s the costs which can be a explanation for concern.

Domestic gas costs – that are instantly linked to worldwide oil costs as India imports 85 per cent of its oil wants – haven’t been revised for a report 120 days in a row.

Rates are speculated to be revised day by day, however state-owned gas retailers IOC, BPCL and HPCL froze charges sooner did electioneering to elect a brand new authorities in Uttar Pradesh, Punjab, and three different states began.

Petrol prices Rs 95.41 a litre in Delhi, and diesel is priced at Rs 86.67. This value is after accounting for the excise responsibility minimize and a discount within the VAT charge by the state authorities.

Before these tax reductions, petrol value had touched an all-time excessive of Rs 110.04 a litre, and diesel got here for Rs 98.42. These charges corresponded to Brent, hovering to a peak of $86.40 per barrel on October 26, 2021. Brent was $82.74 on November 5, 2021, earlier than it began to fall and touched $68.87 a barrel in December.

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