New Delhi, July 02: Making a case for further
increase in petrol and diesel prices, financial firm Citi
today said that oil companies may lose Rs 40,000 crore in
revenues if the prices are not aligned with international
rates.
"...Our oil analyst believes that the under-recoveries on
cooking fuels would be Rs 27,400 crore, (and) Rs 40,000 crore
if transport fuels are not adjusted any further," Citi said in
a report.
Following a rise in the international price of crude oil
and the increasing under-recovery of state-run Oil Marketing
Companies (OMCs), the government yesterday increased the price
of petrol by Rs 4 a litre and diesel by Rs 2 a litre.
The hike announced was short of Rs 5.82 a litre needed to
align domestic petrol rates to international parity and Rs
3.62 per litre in case of diesel.
The government did not increase domestic LPG and kerosene
rates despite state-run oil firms losing Rs 92.96 per cylinder
and Rs 15.26 a litre respectively.
"Although this is still less than current international
prices (petrol and diesel would need to be raised by an
additional Rs 2.5/ltr)...the hike is positive, bodes well for
the reform process and is a step towards fiscal
consolidation," the report said.
Citi also said the cut in fuel prices would also lead to
increase in inflation.
Given that petrol and diesel have a weight of 2.9 per
cent in the WPI, the fuel price hike would have about 30 basis
points impact on inflation, it said.
It expects inflation to cross 4 per cent by year end,
adding that the Reserve Bank will reverse its easy money
policy next year.
Inflation stayed negative for the third week in a row, at
minus 1.3 per cent for the week ended June 20, even as prices
of food like fruit and vegetables rose as compared to last
year during the same period.
Bureau Report
First Published: Thursday, July 02, 2009, 21:15