New Delhi: India may witness more fuel price hikes in the coming months as rising crude oil prices and a falling rupee continue to increase pressure on oil marketing companies (OMCs).
The Union Government recently increased petrol and diesel prices by Rs 3 per litre after global crude oil prices surged sharply due to the ongoing Iran war. The rise in oil prices has reportedly caused losses of nearly Rs 1,000 crore per day for OMCs.
At the same time, the Indian rupee touched a record low against the US dollar on Monday. The rupee fell to 96.18 per dollar, crossing its earlier all-time low of 96.1350. Analysts said global tensions, rising bond yields and weak investor confidence pushed the currency lower.
Fuel Price Hike May Not Be Enough
According to a report by SBI Research, the Rs 3 per litre fuel price increase could help OMCs recover nearly Rs 52,700 crore during FY27. However, total losses may still remain close to Rs 3.6 lakh crore if crude oil prices continue to stay high.
Brent crude prices have reportedly jumped over 50 per cent since the Iran conflict intensified earlier this year. Union Petroleum Minister Hardeep Singh Puri said oil companies were facing heavy losses because of rising global crude prices.
Why Rupee Weakness Matters?
The SBI Research report explained that when the rupee weakens, India has to pay more in rupee terms for importing crude oil. Assuming crude oil prices at USD 106 per barrel and the rupee at Rs 94 per dollar, the landed cost comes to nearly Rs 9,964 per barrel.
The recent fuel price hike provides oil companies a benefit of around Rs 477 per barrel. However, if the rupee weakens further by another Rs 2 against the dollar, much of that benefit could disappear because import costs would rise sharply.
Experts Warn Of More Price Hikes
ICRA Ltd. Senior Vice President Prashant Vasisht said the Rs 3 per litre increase offers only limited relief to OMCs.
He added that even after the latest revision, oil companies may still face losses of around Rs 7.5 per litre on petrol and Rs 3.2 per litre on diesel daily.
Vasisht also warned that if global crude oil prices continue to rise, the government and OMCs may have to consider another round of fuel price hikes in the future.
