Now, drive at the oil cos' mercy
Oil companies will now have complete autonomy to revise prices of kerosene, LPG, petrol and diesel.
By TNN |
NEW DELHI: The next time crude oil prices cross $75, you will automatically end up paying a higher fuel bill without having to wait for a Cabinet nod. Oil companies will now have complete autonomy to revise prices of all four products, including cooking fuels — kerosene and LPG — apart from petrol and diesel, in line with the new pricing regime introduced by the government. The good news is that prices will also need to be brought down if global prices soften, and the hikes will now be in small doses, which would be easy on the pocket.
Putting to rest all speculation of a roll back in prices, petroleum secretary MS Srinivasan said: “The government has taken a final decision. There is no rethink, or roll back. The price increase was marginal and long overdue. Only 16% of the burden has been passed on to consumers.”
Senior government officials said that Prime Minister Manmohan Singh stood his ground on the price hike decision, even as the government displayed a commitment to reforms by giving complete autonomy to oil firms to fix prices of all fuels, the first time since the administered pricing regime was decontrolled in April ’02.
State-run oil marketing companies — IOC, HPCL, BPCL, IBP — have until now exercised autonomy on price fixing only on paper. The Cabinet has decided to give complete autonomy to oil companies to revise prices as per the trade parity formula. According to the decision, every dollar increase in crude prices would translate to a change in retail prices.
However, the government is yet to decide the modalities and the tenure of the changes at the retail level. It is estimated that with every dollar increase per barrel of crude, petrol will be costlier by 39 paise per litre, while diesel will be dearer by 30 paise per litre. Kerosene prices, which have remained untouched, will move up by 36 paise per litre and LPG will move up by 67 paise per cylinder.
The recent price hike of Rs 4 per litre for petrol and Rs 2 per litre for diesel is pegged at an international price of $75 a barrel. While consumers are paying prices that reflect a crude price of $54 a barrel, the balance is being met through government bonds and subsidies from upstream oil companies.
Since prices have already been pegged at $75, oilcos will need to revise prices only if it crosses the $75-mark. This would translate to a $70 Indian basket price. The Indian basket of crude is ruling at around $68 a barrel now.
Putting to rest all speculation of a roll back in prices, petroleum secretary MS Srinivasan said: “The government has taken a final decision. There is no rethink, or roll back. The price increase was marginal and long overdue. Only 16% of the burden has been passed on to consumers.”
Senior government officials said that Prime Minister Manmohan Singh stood his ground on the price hike decision, even as the government displayed a commitment to reforms by giving complete autonomy to oil firms to fix prices of all fuels, the first time since the administered pricing regime was decontrolled in April ’02.
State-run oil marketing companies — IOC, HPCL, BPCL, IBP — have until now exercised autonomy on price fixing only on paper. The Cabinet has decided to give complete autonomy to oil companies to revise prices as per the trade parity formula. According to the decision, every dollar increase in crude prices would translate to a change in retail prices.
However, the government is yet to decide the modalities and the tenure of the changes at the retail level. It is estimated that with every dollar increase per barrel of crude, petrol will be costlier by 39 paise per litre, while diesel will be dearer by 30 paise per litre. Kerosene prices, which have remained untouched, will move up by 36 paise per litre and LPG will move up by 67 paise per cylinder.
The recent price hike of Rs 4 per litre for petrol and Rs 2 per litre for diesel is pegged at an international price of $75 a barrel. While consumers are paying prices that reflect a crude price of $54 a barrel, the balance is being met through government bonds and subsidies from upstream oil companies.
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Since prices have already been pegged at $75, oilcos will need to revise prices only if it crosses the $75-mark. This would translate to a $70 Indian basket price. The Indian basket of crude is ruling at around $68 a barrel now.
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