Sujata Sharma, Joint Secretary in the Ministry of Petroleum and Natural Gas, said on Monday that due to the increase in the prices of petrol and diesel in four phases by about Rs 7.5 per liter, the loss of public sector oil companies has reduced to about Rs 600 crore per day. The Joint Secretary said that before the price revision that started from May 15, oil companies were incurring a loss of about Rs 1,000 crore per day on the sale of petrol, diesel and domestic cooking gas LPG. Sharma said that the loss has now reduced to a little less than Rs 600 crore per day.
He said that this also includes the loss incurred on the sale of domestic LPG. Domestic LPG is sold at a subsidized rate and the difference between the cost and the retail selling price is borne by the government. Petrol and diesel are considered products with market based pricing. Despite more than 50 percent increase in crude oil prices due to the Iran war, government oil companies did not change the retail prices for a long time, due to which losses on these products increased.
Increase in shares of oil companies
Due to this, shares of the country’s government oil companies closed with gains on Monday. The reason for this was the huge fall in the prices of crude oil and the recent increase in the prices of petrol and diesel. Brent crude, considered the main gauge of global oil prices, fell by more than 5 percent. This happened when America and Iran agreed in principle to reopen the Strait of Hormuz. Shares of Bharat Petroleum Corporation Limited (BPCL) rose 4.30 percent to close at Rs 308.25 on BSE. During the day’s trading, the stock rose 4.55 percent to an intraday high of Rs 309.
Shares of Hindustan Petroleum Corporation Limited (HPCL) closed at Rs 403.40 with a gain of 3.52 percent on BSE. During the day’s trading, it jumped 5.86 percent to reach the day’s high of Rs 412.55. Shares of Indian Oil Corporation (IOC) gained 3.15 percent and reached Rs 143.90. In intraday trading, the company’s shares rose 4.15 percent to Rs 145.30.
Hariprasad K, Research Analyst and Founder, Livelong Wealth, said that at the sectoral level, oil marketing companies (OMCs) remained strongly bullish despite the recent increase in petrol and diesel prices. Shares like IOC, BPCL and HPCL surged as a combination of higher retail fuel prices and softening global crude oil prices led to significantly improved near-term refining and marketing margin expectations.
Increase in prices of petrol and diesel
On Monday, petrol prices were increased by Rs 2.61 per liter and diesel prices were increased by Rs 2.71 per liter. This was the fourth increase in less than two weeks, through which the burden of the huge increase in global crude oil prices due to the Iran conflict, which was being avoided till now, was now passed on to consumers. With this latest increase, the total increase since May 15 has reached approximately Rs 7.5 per liter.
The rise came at a time when global oil prices fell amid expectations of a possible deal between the US and Israel to end the war with Iran. Since late February, global crude oil prices have increased by more than 50 percent due to US and Israeli attacks on Iran and disruptions to shipping through the Strait of Hormuz, a vital global oil route.
Government retailers delayed passing on the increased costs to customers for weeks. The government said that the purpose of this step was to protect customers from inflation. However, opposition parties accused the government of withholding the price increase till after the elections in important states. Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited together control 90 percent of India’s fuel market.
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