March 25, 2021 4:31:23 am
State-owned oil marketing companies (OMCs) on Wednesday cut prices of petrol and diesel for the first time this year, as crude oil costs fell to their lowest levels since early February. OMCs cut petrol price by 18 paise to Rs 91 per litre and diesel by 17 paise to Rs 81.3 per litre in Delhi.
The cut is the first change in petrol and diesel prices after a 24-day halt in revisions by OMCs. This is the first reduction in prices since September 2020, with key state elections set to be held in March and April. Prior to the halt in revisions, there had been a steady rise in petrol and diesel prices, which reached record levels as Brent crude rose from about $40 per barrel at the end of October to $70 in early March before falling to about $62.75 (as of 10:21 am EST) Wednesday.
Experts said though crude prices were rising, the correction from record highs would have helped OMCs recover losses from a halt in hikes.
“The government had allowed the marketing margins of OMCs to steadily rise to Rs 2.5-3 per litre on petrol and diesel, but the freeze in price revisions as crude prices were still climbing would have wiped out their margins,” said Vivekanand Subbaraman, analyst at Ambit Capital, adding the fall in the price of crude in the past fortnight would have helped OMCs recover losses during the period when it was rising and auto fuel costs were held constant.
Subbaraman added the cut in petrol and diesel prices on Wednesday signalled a return to normal marketing margins for OMCs. Sources said OMCs had decided to halt petrol and diesel price revisions starting February 28 as fuel costs had become a key electoral issue in the upcoming elections in Tamil Nadu, West Bengal, Kerala and Assam.
Experts said the OMCs were likely to return to normal revisions in the prices of petrol and diesel post these elections. Government officials noted that the oil marketing companies had faced negative margins on the sale of petrol and diesel in the initial phase of the halt on price revisions.
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