New Delhi: The second price hike of around 90 paise in petrol and diesel is likely to trim losses of Oil Marketing Companies (OMCs) by another five percent according to the estimates.
The market analysts believe that the second price hike will improve daily profitability of OMCs by nearly Rs 38 crore.
With the latest revision, the two fuel price hikes together are estimated to have reduced the losses of oil marketing companies by around 30 per cent, offering partial relief to their balance sheets even as pressure from international crude prices persists.
The latest rate revision came after the Petroleum Minister Hardeep Singh Puri flagged losses incurred by the state own OMCs, adding that the firms are losing nearly Rs 1 lakh crore to Rs 1.2 lakh crore in the first quarter due to conflict in the West Asia.
Commenting on another rate revision, Dhananjay Sinha - CEO & Co-Head Institutional Equities, Systematix Group said, "This is on expected lines. The initial 3-rupee hike was significantly small compared to the under recovery faced by the OMCs. It covered only 8%."
"We had been expecting a cumulative rise of 15 odd rupees. It appears the government has chosen to allow small but frequent rise. Inflationary pressure is like to accentuate as a consequence," Sinha said.
Sinha further added that all of this is likely to impact reach income of households and their spending power, thereby slowing the overall growth
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According to the estimates, every 50-paise increase in fuel prices lifts the EBITDA of OMCs by around 7-11 per cent.
The stock market investors will have their eyes on the stocks of major OMCs such as Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited.
Petrol and diesel prices have been hiked for the second time in four days, with retail rates rising by around 90 paise per litre across major cities, as state-run OMCs aims to partially offset mounting losses triggered by elevated global crude prices.
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The latest increase follows an earlier Rs 3 per litre hike announced last week, taking the cumulative rise in fuel prices to nearly Rs 4 per litre within a week.
Government estimates had earlier pegged daily losses for OMCs at around Rs 750 crore even after the initial Rs 3 per litre increase, which itself had reduced losses by nearly 25 per cent.
India consumes approximately 463 million litres of petrol and diesel daily, of which around 90 per cent or nearly 417 million litres is supplied by state-owned oil marketing firms.
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On the other hand, economists believe that the government will have to raise prices of the petrol and diesel by Rs 10 to fully offset the losses of OMCs and fuel prices will be announced in small instalments so that the people don’t panic.
Ends.
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