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New Delhi: The prices of petrol and diesel were increased by about 90 paise per liter on Tuesday. Fuel prices have been increased for the second time in less than a week. According to industry sources, after the increase in fuel prices, the price of petrol in New Delhi increased to Rs 98.64 per liter which was earlier Rs 97.77 per liter. Whereas the price of diesel increased from Rs 90.67 to Rs 91.58.

Last Friday, the prices of petrol and diesel were increased by Rs 3 per liter for the first time in more than four years. Global crude oil prices have risen due to the Iran war that began in February. In view of this, government retail petroleum companies decided to pass on some part of their increasing losses to customers. Earlier, in some states including West Bengal, fuel prices were kept stable during the assembly elections. Fuel prices vary due to differences in value added tax (VAT) in different states.
Apart from petrol and diesel, the prices of CNG (compressed natural gas) were increased by Rs 2 per kg on May 15 in many cities including Delhi and Mumbai. On Sunday, the price of CNG was again increased by Re 1 per kilogram. Global crude oil prices have increased by more than 50 percent due to the blockage of the Strait of Hormuz, an important route for the movement of global oil, following the US and Israel’s attack on Iran on February 28 and Tehran’s retaliatory action.

Despite this increase, retail fuel rates were kept stable at two-year old rates. The government says that this step was taken to protect consumers from rising global energy costs. However, opposition parties said that the government did not increase the prices for political purposes as elections were being held in many important states. The increase of Rs 3 per liter last Friday came after the elections and the ruling Bharatiya Janata Party (BJP) winning three out of five states including West Bengal.

However, this increase was only one-fifth of the increase needed to bring rates in line with costs. On Monday, Sujata Sharma, Joint Secretary, Ministry of Petroleum and Natural Gas, had said that since the May 15 increase, losses have come down by one-fourth and oil companies are still incurring losses of around Rs 750 crore per day. After Tuesday’s hike, petrol and diesel prices are now at their highest since May 2022. It is noteworthy that there was no increase in fuel prices from April 2022.
However, just before the Lok Sabha elections in March 2024, the prices of petrol and diesel were cut by Rs 2 per liter. The last price increase was in April 2022. Now after this increase, the price of petrol in Mumbai is now Rs 107.59 per liter and the price of diesel is Rs 94.08 per liter. The price of petrol in Kolkata is Rs 109.70 per liter and the price of diesel is Rs 96.07 per liter. Whereas in Chennai the price of petrol has increased to Rs 104.49 and the price of diesel has increased to Rs 96.11.

According to industry sources, the increased price is less than the increase in crude oil prices. Even after this, retail fuel sellers will have to suffer huge losses. According to CRISIL, oil companies are facing a loss of about Rs 10 per liter on petrol and Rs 13 per liter on diesel after the price hike on May 15. Both these price hikes come in line with the excise duty cut announced in March as well as the government’s measures to reduce fuel consumption and control the country’s oil import bill. Prime Minister Narendra Modi has called for measures like judicious use of fuel, purchase of gold and postponement of foreign travel to save foreign exchange in the wake of the Middle East crisis. Rising energy prices are putting pressure on India’s foreign exchange reserves and the current account deficit is at risk of widening for the third consecutive year. Some state governments have already directed departments to limit travel, avoid face-to-face meetings and run offices with reduced staff.

Private fuel retailers had already increased petrol prices. Nayara Energy, the country’s largest private fuel seller, increased the price of petrol by Rs 5 per liter and diesel by Rs 3 per liter in March, while Shell increased the price of petrol by Rs 7.41 and diesel by Rs 25 per liter from April 1. In Bengaluru, Shell is selling at Rs 119.85 per liter and diesel at Rs 123.52 per liter.

The price of domestic cooking gas LPG was increased by Rs 60 per cylinder in March, but it is still much lower than the actual cost. Oil companies are incurring a loss of Rs 674 on a 14.2 kg LPG cylinder. According to industry sources, it seems that the price increase is being done after careful consideration. On the one hand, this increase is sufficient to partially reduce the margin pressure on oil companies, while on the other hand, it will not cause any major shock to inflation. However, he says that this increase will definitely have some impact on inflation.