Amid rising crude oil prices across the world, petrol and diesel prices have been increased twice across the country. The first hike, which came into effect on May 15, saw both petrol and diesel prices rise by ₹3 per litre; Today – May 19 – prices were increased by an additional ₹0.90 per litre. Overall, petrol and diesel prices have increased by about ₹4 across the country; However, experts are now arguing that this increase is not enough. He claims that government oil companies need to increase the prices of petrol and diesel by double digits to recover their losses.
**How much should the prices of petrol and diesel increase?**
Kotak Institutional Equities suggests that India needs to make more significant increases in fuel rates to deal with the economic crisis caused by rising crude oil prices. They argue that the recent hike in petrol and diesel prices is inadequate, and an additional increase of ₹13-17 per liter may be necessary to fully compensate the rising losses being incurred by oil companies.
The brokerage firm further said that if the ongoing conflict in West Asia continues and crude oil prices remain high, existing government measures – such as increasing fuel prices and increasing import duties on gold – will not be enough to meet the current challenges. To deal with the situation, significant increases in fuel prices, as well as other concrete measures, may need to be implemented.
**Companies face huge losses**
Kotak said that even after the recent price hike, oil companies are incurring huge losses. The brokerage firm estimates that state-run oil companies are currently losing ₹25,000 crore every month due to ‘under-recovery’ (selling fuel below cost).
Specifically, under-recovery on diesel is estimated to be around ₹11.40 per litre, while under-recovery on petrol is estimated to be around ₹14.30 per litre. Based on these estimates, Kotak believes prices may need to rise further by ₹13-17 per liter to fully recover losses.
Reports suggest that the possibility of further increase in fuel prices cannot be ruled out. Business Today TV reported that oil companies are trying to recoup losses incurred over the past 75 days, although future price increases may be implemented gradually. **Plan to gradually increase fuel prices**
With the rise in crude oil prices, there is every possibility of petrol and diesel prices increasing. An Indian Oil Corporation (IOC) official told *Infoline* that this gradual increase in prices is being done with the aim of protecting consumers and reducing inflationary pressure.
Earlier this week, Sujata Sharma, Joint Secretary, Ministry of Petroleum and Natural Gas, had said that oil companies were losing around ₹750 crore every day; However, the price hike implemented on May 15 has helped reduce this loss by about one-fourth. IDFC First Bank also expects retail fuel prices to rise further in the coming months due to the current lack of cost recovery.