Petrol set to hit pricing band

According to an IOC senior official, diesel has already hit the 10 per cent free-pricing band. Given the situation, the Government might not allow the oil firms to revise the prices automatically on August 16 as is due. ‘‘The oil firms might have to wait till the end of the month anyway to revise the prices,’’ the official added.

However, the first quarter profits of the oil marketing and refineries indicated that most of these firms have registered a healthy growth in their net profits (see table). Oil company officials explained this improvement in net profits, inspite of the under-recoveries in LPG and kerosene, as mainly due to the high refining margin and increased production by the refineries. Refining margin, at present is ruling around $6 to $7 per barrel. The IOC, for instance, has increased production from 89 per cent to 102 per cent to meet higher demand during the quarter.

But the fact remains that oil marketing firms charge 20 per cent customs duty on both petrol and diesel from the customers, which is actually notional as petrol and diesel are not imported.

Hence, this 20 per cent is an additional burden on consumers. Further, on petrol there is a 26 per cent excise duty while on diesel there is 11 per cent excise. Hence, there is scope of duty restructuring in both the fuels to lower the burden on the consumers.

However, oil firm officials added that they are ready to take the hit on petrol and diesel provided the Government decides to go in for a phased increase in the prices of LPG and kerosene. ‘‘IOC, for example, has Rs 5,500 crore under-recoveries from LPG and kerosene. If the Government takes care of this we would definitely consider absorbing the increase in the prices of petrol and diesel,’’ officials added.